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

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

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

                For the quarterly period ended September 30, 2000

                                       or

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

                  For the transition period from _____ to _____



                         Commission File Number 0-22342

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


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

                       101 SOUTH STRATFORD ROAD, SUITE 500
                       WINSTON-SALEM, NORTH CAROLINA 27104
                    (Address of principal executive offices)

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

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

Number of shares of Common Stock, $.01 par value, outstanding as of November 1,
2000: 13,337,194 shares.




<PAGE>





                               TRIAD GUARANTY INC.

                                      INDEX
                                                                          Page
                                                                         Number
Part I. Financial Information:

    Item 1. Financial Statements:

    Consolidated Balance Sheets as of September 30, 2000 (Unaudited)
             and December 31, 1999............................................3

    Consolidated Income Statements for the Three and Nine Month
             Periods Ended September 30, 2000 and 1999 (Unaudited)............4

    Consolidated Statements of Cash Flows for the Nine Month
             Periods Ended September 30, 2000 and 1999 (Unaudited)............5

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

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

Part II. Other Information:

    Item 6. Exhibits and Reports on Form 8-K.................................14

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


                                        2

<PAGE>



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

                                                             September 30,     December 31,
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
Assets                                                        (Unaudited)
Invested assets:
Fixed maturities, available-for-sale, at fair value ........  $193,412,851    $164,579,416
Equity securities, available-for-sale, at fair value........    13,462,860      13,075,648
Short-term investments......................................     9,558,970      13,908,666
                                                              ------------    ------------
                                                               216,434,681     191,563,730

Cash........................................................       854,786         215,553
Real estate acquired in settlement of claims................           ---         145,515
Accrued investment income...................................     3,011,006       2,591,612
Deferred policy acquisition costs...........................    21,978,338      19,906,877
Prepaid federal income taxes ...............................    46,174,666      35,415,666
Property and equipment......................................     8,726,117       5,915,262
Reinsurance recoverable.....................................         6,916          29,980
Other assets................................................     8,661,562       7,356,357
                                                              ------------    ------------
Total assets................................................  $305,848,072    $263,140,552
                                                              ============    ============
Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses.....................  $ 14,994,832    $ 14,751,348
    Unearned premiums.......................................     6,901,873       6,831,290
    Amounts payable to reinsurer............................       961,284         319,294
    Current taxes payable...................................        70,274          70,272
    Deferred income taxes...................................    54,755,044      41,750,341
    Unearned ceding commission..............................     1,635,351         400,521
    Long-term debt..........................................    34,465,919      34,461,979
    Accrued interest on debt................................       583,722       1,274,972
    Accrued expenses and other liabilities..................     5,188,728       6,208,079
                                                              ------------    ------------
Total liabilities...........................................   119,557,027     106,068,096
Commitments and contingent liabilities - Note 4
Stockholders' equity:
  Preferred stock, par value $.01 per share ---
    authorized 1,000,000 shares; no shares issued
    and outstanding.........................................           ---             ---
  Common stock, par value $.01 per share ---
    authorized 32,000,000 shares; 13,325,194 shares
    issued and outstanding at September 30, 2000 and
    13,303,194 at December 31, 1999.........................       133,252         133,032
  Additional paid-in capital................................    62,268,718      61,972,312
  Accumulated other comprehensive income, net of
    income tax asset of $1,261,382 at September 30, 2000
    and $2,546,666 at December 31, 1999.....................    (2,336,819)     (4,723,775)
  Deferred compensation.....................................      (156,259)        (69,414)
  Retained earnings.........................................   126,382,153      99,760,301
                                                              ------------    ------------
Total stockholders' equity..................................   186,291,045     157,072,456
                                                              ------------    ------------
Total liabilities and stockholders' equity..................  $305,848,072    $263,140,552
                                                              ============    ============
</TABLE>
                             See accompanying notes.

                                        3
<PAGE>
                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                      Three Months Ended             Nine Months Ended
                                                          September 30                 September 30
                                                   -------------------------     -------------------------
                                                      2000           1999           2000          1999
                                                      ----           ----           ----          ----
<S>                                                 <C>           <C>            <C>           <C>
Revenue:
Premiums written:
   Direct.......................................... $19,643,199   $17,033,429    $56,479,553   $48,086,566
   Assumed.........................................       1,310         4,238          7,042        13,547
   Ceded...........................................  (1,351,124)     (402,691)    (3,411,933)   (1,125,533)
                                                    -----------   -----------    -----------   -----------
Net premiums written...............................  18,293,385    16,634,976     53,074,662    46,974,580
Change in unearned premiums........................    (222,812)     (130,101)       (23,938)      (22,944)
                                                    -----------   -----------    -----------   -----------
Earned premiums....................................  18,070,573    16,504,875     53,050,724    46,951,636
Net investment income..............................   3,155,999     2,657,110      9,149,439     7,743,336
Realized investment gains..........................     906,172       (33,890)     1,719,856       998,350
Other income.......................................       7,500         3,500         18,865        12,944
                                                    -----------   -----------    -----------   -----------
                                                     22,140,244    19,131,595     63,938,884    55,706,266
Losses and expenses:
Losses and loss adjustment expenses................   1,940,536     1,525,266      5,563,788     5,801,207
Reinsurance recoveries.............................      (8,171)       (6,651)        24,416       (12,551)
                                                    -----------   -----------    -----------   -----------
Net losses and loss adjustment expenses............   1,932,365     1,518,615      5,588,204     5,788,656
Interest expense on debt...........................     692,590       692,487      2,077,690     2,087,404
Amortization of deferred policy acquisition costs..   2,083,299     1,744,618      6,111,187     5,213,879
Other operating expenses (net).....................   3,706,422     3,815,904     11,820,324    11,094,387
                                                    -----------   -----------    -----------   -----------
                                                      8,414,676     7,771,624     25,597,405    24,184,326
                                                    -----------   -----------    -----------   -----------
Income before income taxes.........................  13,725,568    11,359,971     38,341,479    31,521,940
Income taxes:
   Current.........................................         ---        (2,144)           208        12,286
   Deferred........................................   4,241,494     3,488,049     11,719,418     9,611,404
                                                    -----------   -----------    -----------   -----------
                                                      4,241,494     3,485,905     11,719,626     9,623,690
                                                    -----------   -----------    -----------   -----------
Net income......................................... $ 9,484,074   $ 7,874,066    $26,621,853   $21,898,250
                                                    ===========   ===========    ===========   ===========

Earnings per common and
   common equivalent share:
   Basic...........................................    $ .71          $ .59         $ 2.00        $ 1.64
                                                   ============   ===========    ===========   ===========
   Diluted.........................................    $ .69          $ .58         $ 1.94        $ 1.61
                                                   ============   ===========    ===========   ===========
Shares used in computing earnings per
   common and common equivalent share:
   Basic...........................................  13,321,574    13,296,118     13,314,971    13,315,470
                                                   ============   ===========    ===========   ===========
   Diluted.........................................  13,753,179    13,633,130     13,694,535    13,632,235
                                                   ============   ===========    ===========   ===========
</TABLE>

                             See accompanying notes.

                                       4

<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                               Nine Months Ended
                                                                  September 30
                                                           ---------------------------
                                                              2000           1999
<S>                                                        <C>             <C>
Operating activities
Net income...............................................  $26,621,853     $21,898,250
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Loss and unearned premium reserves....................      314,067       2,811,483
   Accrued expenses and other liabilities................   (1,019,351)        544,629
   Amounts due to/from reinsurer.........................      618,410         790,314
   Accrued investment income.............................     (419,394)       (490,862)
   Policy acquisition costs deferred.....................   (8,182,648)     (8,181,460)
   Amortization of policy acquisition costs..............    6,111,187       5,213,879
   Net realized investment gains ........................   (1,719,856)       (998,350)
   Provision for depreciation............................      562,042         539,757
   Accretion of discount on investments..................   (1,022,675)       (788,322)
   Deferred income taxes.................................   11,719,418       9,611,404
   Prepaid federal income taxes .........................  (10,759,000)     (6,874,000)
   Unearned ceding commission............................    1,234,830        (186,558)
   Accrued interest on debt..............................     (691,250)       (691,250)
   Real estate acquired in claim settlement..............      145,515        (145,515)
   Other assets..........................................   (1,190,963)     (1,233,690)
                                                           -----------     -----------
Net cash provided by operating activities................   22,322,185      21,819,709
Investing activities
Securities available-for-sale:
    Purchases - fixed maturities.........................  (35,469,807)    (36,005,234)
    Sales - fixed maturities.............................   11,806,158      24,185,777
    Purchases - equities.................................   (1,663,169)     (4,095,139)
    Sales - equities.....................................    2,520,941       2,989,878
  Purchases of other invested assets.....................          ---      (3,000,000)
  Purchase of property and equipment.....................   (3,372,897)     (2,450,488)
                                                           -----------     -----------
Net cash used in investing activities....................  (26,178,774)    (18,375,206)
Financing activities
Purchase and subsequent retirement of common stock.......          ---      (2,602,187)
Proceeds from exercise of stock options..................      146,126         172,274
                                                           -----------     -----------
Net cash provided by financing activities................      146,126      (2,429,913)
                                                           -----------     -----------
Net change in cash and short-term investments............   (3,710,463)      1,014,590
Cash and short-term investments at beginning of period...   14,124,219       6,329,392
                                                           -----------     -----------
Cash and short-term investments at end of period.........  $10,413,756     $ 7,343,982
                                                           ===========     ===========
Supplemental schedule of cash flow information
 Cash paid during the period for:
   Income taxes and United States Mortgage Guaranty
     Tax and Loss Bonds.................................. $ 10,759,208     $ 6,874,205
   Interest.............................................. $  2,765,000     $ 2,775,017
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000
                                   (Unaudited)


NOTE 1 -- THE COMPANY

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


NOTE  2 -- BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the three and nine month  periods  ended
September  30, 2000 are not  necessarily  indicative  of the results that may be
expected for the year ending December 31, 2000. For further  information,  refer
to the consolidated  financial  statements and footnotes thereto included in the
Triad  Guaranty Inc.  annual report on form 10-K for the year ended December 31,
1999.


NOTE 3 -- CONSOLIDATION

     The consolidated  financial  statements include Triad Guaranty Inc. and its
wholly-owned   subsidiaries.   All   significant   intercompany   accounts   and
transactions have been eliminated.


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

REINSURANCE  - 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-CONTINUED
                               September 30, 2000
                                   (Unaudited)


INSURANCE IN FORCE,  DIVIDEND  RESTRICTIONS,  AND STATUTORY  RESULTS - Insurance
regulations  limit the writing of mortgage  guaranty  insurance  to an aggregate
amount of insured risk no greater than twenty-five  times the total of statutory
capital and surplus and the  statutory  contingency  reserve.  The amount of net
risk for  insurance  in force at September  30, 2000 and  December 31, 1999,  as
presented  below,  was  computed by applying the various  percentage  settlement
options to the insurance in force amounts based on the original  insured  amount
of the loan. Triad's ratio is as follows:



                                   September 30,           December 31,
                                        2000                   1999

Net risk.........................  $3,575,609,500        $3,218,850,073
                                   ==============        ==============
Statutory capital and surplus....  $  101,702,192        $   94,602,027
Statutory contingency reserve....     140,564,039           113,813,344
                                   --------------        --------------
Total............................  $  242,266,231        $  208,415,371
                                   ==============        ==============
Risk-to-capital ratio............     14.8-to-1             15.4-to-1
                                   ==============        ==============


     Triad is  required  under  the  Illinois  Insurance  Code (the  "Code")  to
maintain minimum statutory capital and surplus of $5,000,000. In addition, Triad
Guaranty  Assurance  Corporation is required under the Code to maintain  minimum
capital and surplus of  $5,000,000.  The Code permits  dividends to be paid only
out of  earned  surplus  and  also  requires  prior  approval  of  extraordinary
dividends.  An extraordinary dividend is any dividend or distribution of cash or
other property the fair value of which, together with that of other dividends or
distributions  made within a period of twelve  consecutive  months,  exceeds the
greater  of  (a)  ten   percent  of   Triad's   statutory   surplus  as  regards
policyholders,  or (b)  Triad's  statutory  net  income  for the  calendar  year
preceding the date of the dividend. Triad Re Insurance Corporation, a subsidiary
of Triad and domiciled in Vermont,  is required under the Vermont Insurance Code
to maintain minimum  statutory  capital and surplus of $1,000,000 and is subject
to certain dividend limitations.

     Net income as determined in accordance with statutory  accounting practices
was $37,214,320 for the nine months ended September 30, 2000 and $40,019,488 for
the year ended December 31, 1999.

     At September 30, 2000 and December 31, 1999,  the amount of Triad's  equity
that  could  be paid  out in  dividends  to  stockholders  was  $17,986,264  and

                                        7

<PAGE>


                               TRIAD GUARANTY INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                               September 30, 2000
                                   (Unaudited)

$10,886,099,  respectively,which  was the earned surplus of Triad on a statutory
basis on those dates.

LOSS  RESERVES - Triad  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 Triad.  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   September  30,  2000  and  1999,   the  Company's
comprehensive income was $11.3 million and $5.3 million,  respectively.  For the
nine  month   periods  ended   September  30,  2000  and  1999,   the  Company's
comprehensive income was $29 million and $15.4 million, respectively.


NOTE 7 - - NEW ACCOUNTING STANDARDS

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities  (SFAS 133), which was effective for all fiscal quarters
of all fiscal years  beginning  after June 15, 2000.  The statement  establishes
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  Management does not anticipate the adoption of SFAS 133 will have a
significant  effect on the  Company's  results of  operations  or its  financial
position due to its limited use of derivative instruments.

                                        8

<PAGE>

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

RESULTS OF OPERATIONS

     Net  income  for the first  nine  months of 2000  increased  21.6% to $26.6
million  compared to $21.9 million for the first nine months of 1999. Net income
for the third quarter of 2000 increased  20.4% to $9.5 million  compared to $7.9
million  for the  third  quarter  of  1999.  This  improvement  is  attributable
primarily to a 13.0% (9.5% in the third quarter) increase in earned premiums, an
18.2%  (18.8% in the third  quarter)  increase in net  investment  income,  $1.7
million in realized  investment gains, and an improved combined loss and expense
ratio.

     Net income per share on a diluted  basis  increased  21.0% to $1.94 for the
first nine months of 2000  compared to $1.61 per share for the first nine months
of 1999.  Net  income  per share for the  third  quarter  of 2000 was $0.69 on a
diluted basis compared to $0.58 per share for the same period of 1999. Operating
earnings  per share  were $1.86 for the first nine  months of 2000  compared  to
$1.56 for the  first  nine  months  of 1999,  an  increase  of 19.5%.  Operating
earnings exclude net realized investment gains of approximately $1.7 million and
$1.0 million in the first nine months of 2000 and 1999, respectively.

     Net new  insurance  written  was $3.1  billion for the first nine months of
2000 as compared to $3.5  billion for the first nine months of 1999,  a decrease
of 13.4%. For the third quarter,  net new insurance written totaled $1.2 billion
in 2000 compared to $1.1 billion in 1999. The decrease in new insurance  written
for the nine  months  was  primarily  the  result of  declines  in the  industry
mortgage insurance market; however this market decline moderated somewhat in the
third quarter. Driven by a higher interest rate environment,  the total industry
net new mortgage  insurance  written  market  decreased  19.8% in the first nine
months of 2000 as  compared  to the first  nine  months  of 1999.  According  to
industry data,  Triad's  national market share of net new insurance  written was
2.6% for  both the  third  quarter  and for the  first  nine  months  of 2000 as
compared  to 2.2% and 2.4% for the  respective  periods  in 1999.  Total  direct
insurance in force  reached  $14.5  billion at September  30, 2000,  compared to
$12.6 billion at September 30, 1999, an increase of 14.5%.

     Direct  premiums  written  were $56.5  million for the first nine months of
2000,  an increase of 17.5%  compared to $48.1 million for the first nine months
of 1999. Net premiums  written  increased by 13.0% to $53.1 million in the first
nine  months of 2000  compared  to $47.0  million  for the same  period of 1999.
Earned  premiums  increased  13.0% to $53.1 million for the first nine months of
2000 from  $47.0  million  for the first  nine  months of 1999.  This  growth in
written and earned  premiums  resulted  from both new  insurance  written and an
improvement in the Company's  persistency.  Approximately 43.6% of new insurance
written  during  2000 is  subject  to  captive  mortgage  reinsurance  and other
risk-sharing  arrangements  compared to 22.9% of new insurance written in all of
1999.  Ceded  premiums for the first nine months of 2000,  which  includes third

                                       9
<PAGE>

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

party  reinsurance  arrangements  as well  as  captive  reinsurance  agreements,
increased 203% over the same period of 1999.  This increase in ceded premiums is
due to more  insurance  being written under  risk-sharing  arrangements  and the
Company's  purchase  of  additional  excess of loss  reinsurance  to meet rating
agency capital  guidelines for expected levels of insurance  growth.  Management
anticipates ceded premiums will continue to increase as a result of the expected
increase in risk-sharing programs.

     Refinance  activity  was 12.3% of new  insurance  written in the first nine
months of 2000  compared to 28.3% of insurance  written in the first nine months
of 1999, reflecting the rise in interest rates since early 1999. Persistency, or
the amount of insurance  in force  remaining  from one year prior,  was 82.1% at
September  30,  2000,  compared to 68.0% at  September  30,  1999,  and 77.1% at
December 31, 1999.

     Net  investment  income for the first nine months of 2000 was $9.1 million,
an 18.2%  increase  over $7.7  million  in the first  nine  months of 1999.  Net
investment  income  for the third  quarter  of 2000 was $3.2  million,  an 18.8%
increase over the third quarter of 1999.  This increase in investment  income is
the  result of growth in the  average  book  value of  invested  assets by $27.6
million  to $207.9  million  at  September  30,  2000,  from  $180.3  million at
September  30, 1999.  The growth in invested  assets is  attributable  to normal
operating cash flow. The pre-tax yield on average  invested assets  increased to
5.9% for the first nine  months of 2000,  as compared to 5.7% for the first nine
months of 1999. This increase in yield is a result of increased investments into
higher yielding  intermediate  term securities.  The portfolio's  tax-equivalent
yield was 8.0% for the first nine  months of 2000 versus 7.8% for the first nine
months of 1999. Based on amortized cost,  approximately 69% or $137.9 million of
the Company's  fixed  maturity  portfolio at September 30, 2000, was composed of
state  and  municipal  tax-preferred  securities  as  compared  to 73% or $120.7
million at September 30, 1999.

     The Company's loss ratio (the ratio of incurred losses to earned  premiums)
was 10.5% for the first nine  months of 2000 as  compared to 12.3% for the first
nine months of 1999 and 11.1% for all of 1999.  The loss ratio was 10.7% for the
third  quarter  of 2000  compared  to 9.2% for the third  quarter  of 1999.  The
Company's favorable loss ratio reflects the low level of delinquencies  compared
to the  number of  insured  loans and the fact that as of  September  30,  2000,
approximately 75% 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.

                                       10
<PAGE>

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

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
decreased by 3.5% in the first nine months of 2000 to $5.6  million  compared to
$5.8  million  for the same  period  of 1999.  Net  losses  and loss  adjustment
expenses  for the third  quarter  of 2000 and 1999 were  $1.9  million  and $1.5
million,  respectively.  The  overall  decrease  in net losses  year-to-date  is
reflective  of  the  current  strong  economy,  claim  mitigation  efforts,  and
improvements in the severity of defaulted  policies.  The increase in net losses
for the quarter reflects slightly higher reported  delinquencies compared to one
year ago.

     Amortization  of deferred  policy  acquisition  costs increased by 17.2% to
$6.1  million in the first nine months of 2000  compared to $5.2 million for the
first nine months of 1999.  These costs were $2.1 million for the third  quarter
of 2000  compared to $1.7 million for the third  quarter of 1999, an increase of
19.4%.  The  increase  in  amortization  reflects a growing  balance of deferred
policy  acquisition  costs to amortize as the Company builds its total insurance
in force.

     Other operating expenses increased 6.5% to $11.8 million for the first nine
months of 2000  compared  to $11.1  million  for the same  period in 1999.  This
increase in expenses  for the nine month  period is  primarily  attributable  to
advertising,   production,   personnel,   technology  enhancements,   geographic
expansion,  and the research,  development,  and implementation costs associated
with  risk-sharing  structures.  For the third quarter of 2000,  other operating
expenses were $3.7 million, down slightly from $3.8 million in the third quarter
of 1999.  The expense  ratio  (ratio of  underwriting  expenses to net  premiums
written)  for the first nine months of 2000 was 33.8%  compared to 34.7% for the
first nine months of 1999 and 34.5% for all of 1999.  The expense  ratio for the
third quarter of 2000 was 31.6% compared to 33.4% for the third quarter of 1999.

     The effective tax rate was 30.6% for the first nine months of 2000 compared
to 30.5% for the first nine months of 1999.  Management  expects  the  Company's
effective  tax rate to remain  about  the same as long as yields  from new funds
invested  in  tax-preferred  securities  remain  favorable  in relation to fully
taxable securities.

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 nine months of 2000 of $22.3  million  compared  to $21.8  million for the
same period of 1999.  The increase in Triad's  operating  cash flow reflects the
growth in insurance  written,  new and renewal premium,  and investment  income,
partially offset by the increase in paid claims and underwriting expenses.

                                       11
<PAGE>

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


     The  Company's  business  does not routinely  require  significant  capital
expenditures   other  than  for   enhancements  to  its  computer   systems  and
technological  capabilities.  Positive  cash flows are invested  pending  future
payments of claims and expenses.  Cash flow shortfalls,  if any, could be funded
through  sales  of  short-term   investments  and  other  investment   portfolio
securities.

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

     Consolidated  invested  assets were $216.4  million at September  30, 2000,
compared to $191.6 million at December 31, 1999.  Fixed maturity  securities and
equity  securities  classified as  available-for-sale  totaled $206.9 million at
September 30, 2000. Net unrealized  investment gains were $1.8 million on equity
securities,  and net  unrealized  investment  losses were $5.4  million on fixed
maturity  securities  at  September  30,  2000.  The  fixed  maturity  portfolio
consisted of approximately 70% municipal  securities,  22% corporate securities,
7% U.S. government  obligations,  and 1% mortgage-backed  bonds at September 30,
2000.

     The  Company's  loss  reserves  were $15.0  million at September  30, 2000,
compared to $14.8  million at December  31,  1999.  This growth is the result of
increases in new  insurance  written and the maturing of the  company's  risk in
force.  Consistent with industry practices,  the Company does not establish loss
reserves for future  claims on insured loans which are not currently in default.
The Company's  reserves per delinquent  loan were $20,300 at September 30, 2000,
compared to $21,400 at December 31, 1999. The Company's  delinquency  ratio, the
ratio of delinquent insured loans to total insured loans, was 0.62% at September
30, 2000, compared to 0.64% at December 31, 1999.

     Total  stockholders'  equity  increased to $186.3  million at September 30,
2000, from $157.1 million at December 31, 1999. This increase resulted primarily
from net income of $26.6  million  for the first nine  months of 2000 and by the
change in net  unrealized  gains and losses on  invested  assets  classified  as
available-for-sale of $2.4 million (net of income tax).

     Triad's total statutory  policyholders' surplus increased to $101.7 million
at September 30, 2000,  from $94.6  million at December 31, 1999.  This increase
resulted  primarily  from  statutory  net income of $37.2  million  offset by an
increase  in  the  statutory  contingency  reserve  of  $26.8  million.  Triad's
statutory  earned  surplus was $18.0 million at September 30, 2000,  compared to
$10.9 million at December 31, 1999, reflecting,  primarily,  growth in statutory
net income  greater  than the  increase in the  statutory  contingency  reserve.
Approximately  $399,000 and $1.0  million of the  statutory  earned  surplus for
September 30, 2000, and December 31, 1999, respectively, was attributable to net
unrealized capital gains. The balance in the statutory  contingency  reserve was
$140.6 million at September 30, 2000, compared to $113.8 million at December 31,
1999.


                                     12

<PAGE>

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

   Triad's  ability  to write  insurance  depends  on the  maintenance  of its
claims-paying  ability  ratings  and the  adequacy of its capital in relation to
risk in force. A significant  reduction of capital or a significant  increase in
risk may impair  Triad's  ability  to write  additional  insurance.  A number of
states also  generally  limit Triad's  risk-to-capital  ratio to 25-to-1.  As of
September 30, 2000, Triad's  risk-to-capital ratio was 14.8-to-1, as compared to
15.4-to-1  at December 31, 1999,  and  14.8-to-1  for the industry as a whole at
December 31, 1999, the latest industry data available.

     The  Company is  undertaking  modifications  and  upgrades  to enhance  its
computer systems and  technological  capabilities.  The Company expects to incur
approximately $7.9 million for this system conversion and upgrade (approximately
$7.0 million in  capitalized  costs have been  incurred for the project  through
September  30,  2000)  and  is  funding  the  project  through  cash  flow  from
operations. Management anticipates that this new system will be amortized over a
60 month  period for GAAP  purposes and that  amortization  will  commence  upon
completion of the system conversion. Management anticipates that amortization of
the new system  will  commence  during  the fourth  quarter of 2000 or the first
quarter of 2001.


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 or decrease from their current  levels;
housing  transactions  and  mortgage  issuance  may  decrease  for many  reasons
including changes in interest rates or economic conditions; the Company's market
share may change as a result of changes in underwriting  criteria or competitive
products  or rates;  the amount of new  insurance  written  could be affected by
changes in federal housing legislation, including changes in the Federal Housing
Administration  loan limits and coverage  requirements of Freddie Mac and Fannie
Mae;  the  Company's  financial  condition  and  competitive  position  could be
affected by legislation  impacting the mortgage guaranty  industry  specifically
and the  financial  services  industry in general;  rating  agencies  may revise
methodologies  for determining the Company's  claims-paying  ability ratings and
may  revise  or  withdraw  the  assigned  ratings  at  any  time;  decreases  in
persistency,  which are affected by loan refinancings in periods of low interest
rates,  may have an adverse  effect on  earnings;  the  amount of new  insurance
written  and the  growth of  insurance  in force or risk in force as well as the
performance  of  the  Company  may be  adversely  impacted  by  the  competitive
environment  in the private  mortgage  insurance  industry,  including the type,
structure,  and pricing of products and services  offered by the Company and its
competitors;  the  Company's  performance  may be  impacted  by  changes  in the
performance of the financial markets and general economic  conditions.  Economic
downturns  in  regions  where  Triad's  risk is more  concentrated  could have a
particularly adverse effect on Triad's financial condition and loss development.
Accordingly,   actual   results   may  differ   from  those  set  forth  in  the
forward-looking statements. Attention is also directed to other risk factors set
forth  in  documents  filed by the  Company  with the  Securities  and  Exchange
Commission.



                                      13
<PAGE>


PART II

ITEM 1.  LEGAL PROCEEDINGS - NONE

ITEM 2.  CHANGES IN SECURITIES - NONE

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES - NONE

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

ITEM 5.  OTHER INFORMATION - NONE

ITEM 6.    A.  EXHIBITS

                  Exhibit No.                        Description
                  -----------                        -----------
                      27                      Financial Data Schedule




                                   SIGNATURES

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

                                          TRIAD GUARANTY INC.


Date: November 14, 2000
                                          /s/ Michael R. Oswalt
                                          -------------------------------------
                                          Michael R. Oswalt
                                          Senior Vice President and Controller,
                                          Principal Accounting Officer

















                                       14