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, 2001

                                       or

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

                  For the transition period from _____ to _____



                         Commission File Number 0-22342

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

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


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

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

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

Number of shares of Common Stock, $.01 par value,  outstanding as of November 1,
2001: 13,691,172 shares.

<PAGE>

                               TRIAD GUARANTY INC.

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

Item 1. Financial Statements:

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

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

   Consolidated Statements of Cash Flow for the Nine Month
        Periods Ended September 30, 2001 and 2000 (Unaudited).................5

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

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

Part II. Other Information:

   Item 1. Legal Proceedings.................................................16

   Item 2. Changes in Securities and Use of Proceeds.........................16

   Item 3. Defaults Upon Senior Securities...................................16

   Item 4. Submission of Matters to a Vote of Security Holders...............16

   Item 5. Other Information.................................................16

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

Signatures...................................................................16










                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              September 30,     December 31,
                                                                  2001             2000
                                                              -------------     ------------
Assets                                                        (Unaudited)
Invested assets:
<S>                                                           <C>              <C>
Fixed maturities, available-for-sale, at fair value ......... $240,882,124     $203,924,652
Equity securities, available-for-sale, at fair value.........   11,817,680       11,088,525
Short-term investments.......................................   18,649,885       17,012,080
                                                              ------------     ------------
                                                               271,349,689      232,025,257

Cash.........................................................      602,913        1,512,578
Real estate..................................................       98,410           99,482
Accrued investment income....................................    3,221,078        2,896,977
Deferred policy acquisition costs............................   25,602,455       22,815,422
Prepaid federal income taxes ................................   56,415,416       49,374,666
Property and equipment.......................................   10,981,437        9,234,757
Reinsurance recoverable......................................        7,028            5,587
Other assets.................................................   12,557,003       10,411,877
                                                              ------------     ------------
Total assets................................................. $380,835,429     $328,376,603
                                                              ============     ============
Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses...................... $ 16,521,190     $ 14,986,988
    Unearned premiums........................................    7,057,504        6,933,259
    Amounts payable to reinsurer.............................    2,218,163        1,288,712
    Current taxes payable....................................      222,364           85,062
    Deferred income taxes....................................   71,601,531       60,651,647
    Unearned ceding commission...............................    2,608,396        1,481,691
    Long-term debt...........................................   34,471,555       34,467,285
    Accrued interest on debt.................................      583,722        1,274,972
    Accrued expenses and other liabilities...................    7,520,186        7,375,503
                                                              ------------     ------------
Total liabilities............................................  142,804,611      128,545,119

Commitments and contingent liabilities - Note 4
Stockholders' equity:
  Preferred stock, par value $.01 per share ---
    authorized 1,000,000 shares; no shares issued
    and outstanding..........................................       ---              ---
  Common stock, par value $.01 per share ---
    authorized 32,000,000 shares; 13,691,172
    shares issued and outstanding at
    September 30, 2001 and 13,351,694 at
    December 31, 2000........................................      136,912          133,517
  Additional paid-in capital.................................   68,995,335       62,723,667
  Accumulated other comprehensive income, net of
    income tax liability of $1,719,267 at
    September 30, 2001 and $1,262,863 at
    December 31, 2000........................................    3,198,672        2,351,065
  Deferred compensation......................................     (146,760)        (135,041)
  Retained earnings..........................................  165,846,659      134,758,276
                                                              ------------     ------------
Total stockholders' equity...................................  238,030,818      199,831,484
                                                              ------------     ------------
Total liabilities and stockholders' equity................... $380,835,429     $328,376,603
                                                              ============     ============
</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
                                                     --------------------------    ---------------------------
                                                        2001            2000           2001           2000
Revenue:
Premiums written:
<S>                                                  <C>            <C>            <C>             <C>
   Direct..........................................  $23,834,863    $19,643,199    $67,626,027     $56,479,553
   Assumed.........................................        1,115          1,310          3,616           7,042
   Ceded...........................................   (3,013,692)    (1,351,124)    (7,218,824)     (3,411,933)
                                                     -----------    -----------    -----------     -----------
Net premiums written...............................   20,822,286     18,293,385     60,410,819      53,074,662
Change in unearned premiums........................     (305,376)      (222,812)       (68,288)        (23,938)
                                                     -----------    -----------    -----------     -----------
Earned premiums....................................   20,516,910     18,070,573     60,342,531      53,050,724
Net investment income..............................    3,803,621      3,155,999     10,937,427       9,149,439
Realized investment gains..........................      187,533        906,172        801,429       1,719,856
Other income.......................................        4,030          7,500      1,886,517          18,865
                                                     -----------    -----------    -----------     -----------
                                                      24,512,094     22,140,244     73,967,904      63,938,884

Losses and expenses:
Losses and loss adjustment expenses................    1,549,449      1,940,536      5,883,985       5,563,788
Reinsurance recoveries.............................      (30,643)        (8,171)       (27,842)         24,416
                                                     -----------    -----------    -----------     -----------
Net losses and loss adjustment expenses............    1,518,806      1,932,365      5,856,143       5,588,204
Interest expense on debt...........................      692,702        692,590      2,078,019       2,077,690
Amortization of deferred policy acquisition costs..    2,894,314      2,083,299      7,902,825       6,111,187
Other operating expenses (net).....................    4,463,799      3,706,422     13,108,272      11,820,324
                                                     -----------    -----------    -----------     -----------
                                                       9,569,621      8,414,676     28,945,259      25,597,405
                                                     -----------    -----------    -----------     -----------
Income before income taxes.........................   14,942,473     13,725,568     45,022,645      38,341,479
Income taxes:
  Current..........................................       44,701            ---        137,360             208
  Deferred.........................................    4,559,541      4,241,494     13,796,902      11,719,418
                                                     -----------    -----------    -----------     -----------
                                                       4,604,242      4,241,494     13,934,262      11,719,626
                                                     -----------    -----------    -----------     -----------
Net income.........................................  $10,338,231    $ 9,484,074    $31,088,383     $26,621,853
                                                     ===========    ===========    ===========     ===========

Earnings per common and
   common equivalent share:
   Basic...........................................    $ .76           $ .71         $ 2.31           $2.00
                                                     ===========    ===========    ===========     ===========
   Diluted.........................................    $ .73           $ .69         $ 2.23           $1.94
                                                     ===========    ===========    ===========     ===========
Shares used in computing earnings per
   common and common equivalent share:
   Basic...........................................   13,685,744     13,321,574     13,472,818      13,314,971
                                                     ===========    ===========    ===========     ===========
   Diluted.........................................   14,078,609     13,753,179     13,927,275      13,694,535
                                                     ===========    ===========    ===========     ===========
</TABLE>
                             See accompanying notes.

                                       4

<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                         September 30
                                                              -------------------------------
                                                                  2001              2000
Operating activities
<S>                                                            <C>                <C>
Net income...................................................  $31,088,383        $26,621,853
Adjustments to reconcile net income to net
cash provided by operating activities:
   Loss and unearned premium reserves........................    1,658,447            314,067
   Accrued expenses and other liabilities....................   (2,292,542)        (1,019,351)
   Current taxes payable.....................................      137,302                  2
   Amounts due to/from reinsurer.............................      872,052            618,410
   Accrued investment income.................................     (324,101)          (419,394)
   Policy acquisition costs deferred.........................  (10,689,858)        (8,182,648)
   Amortization of policy acquisition costs..................    7,902,825          6,111,187
   Net realized investment gains ............................     (801,429)        (1,719,856)
   Provision for depreciation................................    1,654,347            562,042
   Accretion of discount on investments......................   (2,224,204)        (1,022,675)
   Deferred income taxes.....................................   13,796,902         11,719,418
   Prepaid federal income tax................................   (7,040,750)       (10,759,000)
   Unearned ceding commission ...............................    1,126,705          1,234,830
   Real estate acquired in claim settlement..................        1,072            145,515
   Accrued interest on debt..................................     (691,250)          (691,250)
   Other assets..............................................   (1,619,635)        (1,258,561)
   Other operating activities................................       87,416             67,596
                                                               -----------        -----------
Net cash provided by operating activities....................   32,641,682         22,322,185

Investing activities
  Securities available-for-sale:
    Purchases - fixed maturities.............................  (56,462,303)       (35,469,807)
    Sales - fixed maturities.................................   26,016,476         11,806,158
    Purchases - equities.....................................   (3,306,812)        (1,663,169)
    Sales - equities.........................................    2,368,983          2,520,941
  Purchase of property and equipment.........................   (3,401,027)        (3,372,897)
                                                               -----------        -----------
Net cash used in investing activities........................  (34,784,683)       (26,178,774)

Financing activities
Proceeds from exercise of stock options......................    2,871,141            146,126
                                                               -----------        -----------
Net cash provided by financing activities....................    2,871,141            146,126
                                                               -----------        -----------
Net change in cash and short-term investments................      728,140         (3,710,463)
Cash and short-term investments at beginning of period.......   18,524,658         14,124,219
                                                               -----------        -----------
Cash and short-term investments at end of period.............  $19,252,798        $10,413,756
                                                               ===========        ===========

Supplemental schedule of cash flow information
Cash paid during the period for:
   Income taxes and United States Mortgage Guaranty Tax
     and Loss Bonds..........................................  $ 7,025,807        $10,759,208
   Interest..................................................  $ 2,765,000        $ 2,765,000
</TABLE>
                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)


NOTE 1 -- THE COMPANY

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


NOTE  2 -- BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance  with  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 and nine month  periods  ended  September 30, 2001 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2001. For further information,  refer to the consolidated financial
statements  and footnotes  thereto  included in the Triad  Guaranty Inc.  annual
report on form 10-K for the year ended December 31, 2000.


NOTE 3 -- CONSOLIDATION

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


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

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

                                       6
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)

INSURANCE IN FORCE,  DIVIDEND  RESTRICTIONS,  AND STATUTORY  RESULTS - Insurance
regulations  limit the writing of mortgage  guaranty  insurance  to an aggregate
amount of insured risk no greater  than 25 times the total of statutory  capital
and surplus and the statutory  contingency  reserve.  The amount of net risk for
insurance  in force at September  30, 2001 and  December 31, 2000,  as presented
below, was computed by applying the various percentage settlement options to the
insurance in force  amounts  based on the original  insured  amount of the loan.
Triad's ratio is as follows:

                                        September 30,        December 31,
                                             2001                2000

Net risk...........................    $ 4,155,223,621     $ 3,738,596,850
                                       ===============     ===============

Statutory capital and surplus......    $   103,682,121     $   101,045,355
Statutory contingency reserve......        181,703,563         150,762,722
                                       ---------------     ---------------
Total..............................    $   285,385,684     $   251,808,077
                                       ===============     ===============
Risk-to-capital ratio..............          14.6-to-1           14.8-to-1
                                       ===============     ===============

     Triad  and  its  wholly-owned   subsidiaries,   Triad  Guaranty   Assurance
Corporation  and Triad Re Insurance  Corporation,  are each required under their
respective  domiciliary  states'  insurance  code to maintain a minimum level of
statutory capital and surplus. Triad, an Illinois domiciled insurer, is required
under the Illinois  Insurance  Code (the "Code") to maintain  minimum  statutory
capital and surplus of  $5,000,000.  The Code permits  dividends to be paid only
out of  earned  surplus  and  also  requires  prior  approval  of  extraordinary
dividends.  An extraordinary dividend is any dividend or distribution of cash or
other property,  the fair value of which,  together with that of other dividends
or distributions made within a period of twelve consecutive months,  exceeds the
greater of (a) ten percent of statutory surplus as regards policyholders, or (b)
statutory net income for the calendar year preceding the date of the dividend.

     Net income as determined in accordance with statutory  accounting practices
was $41,785,748 for the nine months ended September 30, 2001 and $47,830,174 for
the year ended December 31, 2000.

     At September 30, 2001 and December 31, 2000,  the amount of Triad's  equity
that  could  be paid  out in  dividends  to  stockholders  was  $19,471,749  and
$17,329,427,  respectively, which was the earned surplus of Triad on a statutory
basis on those dates.

                                       7
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)

     LOSS  RESERVES - The Company  establishes  loss reserves to provide for the
estimated  costs of  settling  claims  with  respect to loans  reported to be in
default and loans in default which have not been reported to the Company. Due to
the inherent  uncertainty in estimating  reserves for losses and loss adjustment
expenses,  there can be no assurance that the reserves will prove to be adequate
to cover ultimate loss development.


NOTE 5 - - EARNINGS PER SHARE

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


NOTE 6 - - COMPREHENSIVE INCOME

     Comprehensive  income is divided  into net  income and other  comprehensive
income. For the Company,  other  comprehensive  income is composed of unrealized
gains or losses on  available-for-sale  securities,  net of income tax.  For the
three  month  periods  ended   September  30,  2001  and  2000,   the  Company's
comprehensive income was $11.6 million and $11.3 million,  respectively. For the
nine  month   periods  ended   September  30,  2001  and  2000,   the  Company's
comprehensive income was $31.9 million and $29.0 million, respectively.

                                       8


<PAGE>


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

RESULTS OF OPERATIONS

     Net  income  for the first  nine  months of 2001  increased  16.8% to $31.1
million  compared to $26.6 million for the first nine months of 2000. Net income
for the third quarter of 2001 increased  9.0% to $10.3 million  compared to $9.5
million  for the  third  quarter  of  2000.  This  improvement  is  attributable
primarily to a 13.7% (13.5% in the third  quarter)  increase in earned  premiums
and a 19.5% (20.5% in the third quarter) increase in net investment  income. Net
income  for the first  nine  months  of 2001  also  included  the  receipt  of a
nonrecurring  payment of  approximately  $1.9 million  related to the  voluntary
cancellation of an excess of loss reinsurance contract. The payment was reported
as other income in the first quarter of 2001.

     Net income per share on a diluted  basis  increased  14.8% to $2.23 for the
first nine months of 2001  compared to $1.94 per share for the first nine months
of 2000.  Net  income  per share for the  third  quarter  of 2001 was $0.73 on a
diluted  basis  compared  to $0.69  per share  for the same  period of 2000,  an
increase  of 6.5%.  Operating  earnings  per share were $2.19 for the first nine
months of 2001  compared to $1.86 for the first nine months of 2000, an increase
of 17.9%.  Operating  earnings per share for the third quarter of 2001 increased
12.2% to $0.73 per  share  compared  to $0.65  per share for the same  period of
2000. Operating earnings for the first nine months of 2001 exclude approximately
$801,000  ($188,000  in the third  quarter)  of net  realized  investment  gains
compared to  approximately  $1.7 million  ($906,000 in the third quarter) in the
first nine months of 2000.

     Net new  insurance  written  was $7.8  billion for the first nine months of
2001 as compared to $3.1 billion for the first nine months of 2000,  an increase
of 156.7%. For the third quarter, net new insurance written totaled $3.5 billion
in 2001  compared to $1.2  billion in 2000.  Net new  insurance  written for the
first nine months of 2001 included  approximately  $2.2 billion ($1.2 billion in
the  third  quarter)  attributable  to  structured  bulk  transactions.  For the
comparable  periods of 2000, there was no new insurance written  attributable to
structured  bulk  transactions.  The  increase  in new  insurance  written  from
traditional   flow  production  was  primarily   driven  by  new  and  expanding
relationships   with   national   lenders,   strong   demand  for   risk-sharing
arrangements,  and a lower interest rate environment,  which increased refinance
activity.  With consolidation  within the lending industry and Triad's continued
focus on  national  lenders,  a  greater  percentage  of  production  volume  is
concentrated  among a smaller  customer  base.  The loss of one or more of these
significant  customers  could have an adverse effect on the Company's  business.
According to industry  data,  Triad's  national  market share of net new primary
insurance  written  was 3.4% for the first  nine  months  and 4.5% for the third
quarter of 2001 as compared to 2.6% for both  periods in 2000.  Beginning in the
third  quarter of 2001,  the Company and the  industry  adopted new  definitions
regarding the inclusion of bulk  transactions in computing new insurance written
market share.  The Company's  market share reported for 2000 did not include any
bulk transactions, as there was no new insurance written in 2000 attributable to
structured  bulk  transactions.  Total direct  insurance in force  reached $19.5
billion at September 30, 2001,  compared to $14.5 billion at September 30, 2000,
an increase of 35.0%.

     Direct  premiums  written  were $67.6  million for the first nine months of
2001,  an increase of 19.7%  compared to $56.5 million for the first nine months

                                       9
<PAGE>

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


of 2000.  Direct premiums  written for the third quarter of 2001 increased 21.3%
to $23.8 million from $19.6  million in the third quarter of 2000.  Net premiums
written  increased  by 13.8% to $60.4  million in the first nine  months of 2001
compared to $53.1 million for the same period of 2000. Net premiums  written for
the third quarter of 2001 increased by 13.8% to $20.8 million  compared to $18.3
million for the third quarter of 2000. Earned premiums  increased 13.7% to $60.3
million for the first nine months of 2001 from $53.1  million for the first nine
months of 2000. Earned premiums for the third quarter of 2001 were $20.5 million
compared to $18.1  million  for the same  period of 2000,  an increase of 13.5%.
This growth in written and earned  premiums  resulted  from record levels of new
insurance  written and growth in  insurance  in force  offset by the impact of a
declining persistency rate due to a high level of mortgage refinancings.

     Growth in direct  written  premium was partially  offset by the increase in
ceded  premium   written.   Driven   primarily  by  increases  in   risk-sharing
arrangements  and also by  excess of loss  reinsurance,  ceded  premium  written
increased  111.6% to $7.2 million for the nine months ended  September  30, 2001
compared to $3.4 million for the same period of 2000.  Ceded premium  written in
the third quarter of 2001 was $3.0 million  compared to $1.4 million in the same
period of 2000,  an increase of 123.1%.  The  Company's  premium  cede rate (the
ratio of ceded written  premiums to direct  written  premiums) was 10.7% for the
first nine months of 2001 as compared to 6.0% for the first nine months of 2000.
The premium cede rate was 12.6% for the third  quarter of 2001  compared to 6.9%
for the third  quarter of 2000.  Approximately  40.2% of new  insurance  written
(59.1% excluding bulk  transactions)  during 2001 is subject to captive mortgage
reinsurance  and  other  risk-sharing  arrangements  compared  to  43.6%  of new
insurance  written  in the same  period of 2000.  Management  anticipates  ceded
premiums  will  continue  to increase  as a result of the  expected  increase in
risk-sharing programs.

     Refinance  activity  was 32.2% of new  insurance  written in the first nine
months of 2001  compared to 12.3% of insurance  written in the first nine months
of 2000.  Refinance  activity was 34.1% of new  insurance  written for the third
quarter of 2001 compared to 11.6% for the same period of 2000.  Persistency,  or
the amount of insurance  in force  remaining  from one year prior,  was 72.3% at
September 30, 2001 compared to 82.1% at September 30, 2000 and 82.6% at December
31, 2000.  The increase in  refinance  activity and the decrease in  persistency
both reflect the current favorable interest rate environment.

     Net investment  income for the first nine months of 2001 was $10.9 million,
a 19.5%  increase  over $9.1  million  in the  first  nine  months of 2000.  Net
investment  income  for the  third  quarter  of 2001 was $3.8  million,  a 20.5%
increase  over $3.2  million in the third  quarter  of 2000.  This  increase  in
investment  income is the result of growth in the average book value of invested
assets by $38.8  million to $246.7  million at  September  30,  2001 from $207.9
million at September 30, 2000. The growth in invested  assets is attributable to
normal  operating  cash flow. The pre-tax yield on average  invested  assets was
5.9%  for the  first  nine  months  of  both  2001  and  2000.  The  portfolio's
tax-equivalent  yield  increased  slightly  to 8.1% for the first nine months of
2001 from 8.0% for the first  nine  months  of 2000.  Based on  amortized  cost,
approximately  71% of the Company's  fixed  maturity  portfolio at September 30,
2001 was composed of state and municipal tax-preferred securities as compared to
69% at September 30, 2000.

                                       10
<PAGE>

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


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

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased by 4.8% in the first nine months of 2001 to $5.9  million  compared to
$5.6 million for the same period of 2000. This  year-to-date  increase  reflects
the  growing  amount  of the  Company's  insurance  in force  and the  resulting
recognition of a greater amount of insurance in force reaching its highest claim
frequency years.  Net losses and loss adjustment  expenses for the third quarter
of 2001 and 2000 were $1.5  million  and $1.9  million,  respectively,  with the
decrease  reflecting  the  impact of  favorable  trends in claim  frequency  and
severity and strong loss mitigation efforts. The Company's loss ratio (the ratio
of  incurred  losses to earned  premiums)  was 9.7% for the first nine months of
2001 as compared to 10.5% for the first nine months of 2000 and 10.6% for all of
2000.  The loss ratio was 7.4% for the third  quarter of 2001  compared to 10.7%
for the third quarter of 2000.

     As of September 30, 2001,  approximately 74% of the Company's  insurance in
force was originated in the last 36 months.  Management believes, based upon its
experience  and industry  data,  that claims  incidence for it and other private
mortgage  insurers is generally  highest in the third  through sixth years after
loan  origination.  Although the claims  experience on new insurance  written in
previous years has been quite  favorable,  management  does not expect losses to
remain at the low levels  currently  reported.  The Company expects its incurred
losses to increase as a greater  amount of its  insurance  in force  reaches its
anticipated  highest claim frequency years.  Due to the inherent  uncertainty of
future  premium  levels,  losses,  economic  conditions,  and other factors that
impact  earnings,  it is  impossible to predict with any degree of certainty the
impact of such higher claim frequencies on future earnings.

     Amortization  of deferred  policy  acquisition  costs increased by 29.3% to
$7.9  million in the first nine months of 2001  compared to $6.1 million for the
first nine months of 2000.  These costs were $2.9 million for the third  quarter
of 2001  compared to $2.1 million for the third  quarter of 2000, an increase of
38.9%. The increase in amortization  reflects both a growing balance of deferred
policy  acquisition  costs to amortize as the Company builds its total insurance
in force and higher  cancellations  due to refinance  activity in the first nine
months of 2001.

     Other  operating  expenses  increased  10.9% to $13.1 million for the first
nine months of 2001 compared to $11.8  million for the same period in 2000.  For
the third quarter of 2001,  other  operating  expenses  increased  20.4% to $4.5
million  from $3.7  million  in the third  quarter  of 2001.  This  increase  in
expenses is primarily attributable to personnel,  technology  amortization,  and
equipment costs required to support the Company's  product  development,  system
enhancements,   and  expanded  production.  The  expense  ratio  (ratio  of  the
amortization  of deferred  policy  acquisition  costs and other  expenses to net
premiums  written) for the first nine months of 2001 was 34.8% compared to 33.8%

                                       11
<PAGE>

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


for the first nine months of 2000 and 33.7% for all of 2000.  The expense  ratio
for the third quarter of 2001 was 35.3%  compared to 31.6% for the third quarter
of 2000.

     The  effective  tax rates for the nine months ended  September 30, 2001 and
for the third quarter of 2001 were 30.9% and 30.8%, respectively, as compared to
30.6% and 30.9% for the  respective  periods  of 2000.  Management  expects  the
Company's effective tax rate to remain about the same as long as yields from new
funds invested in tax-preferred securities remain favorable in relation to fully
taxable securities.

LIQUIDITY AND CAPITAL RESOURCES

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

     The Company generated positive cash flow from operating  activities for the
first nine months of 2001 of $32.6  million  compared  to $22.3  million for the
same period of 2000.  The increase in Triad's  operating  cash flow reflects the
growth in premiums and  investment  income,  nonrecurring  income related to the
cancellation of the excess of loss reinsurance  contract,  the timing of certain
federal tax  payments,  and a decrease in paid  losses  partially  offset by the
increase in underwriting expenses.

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

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

     Consolidated  invested  assets were $271.3  million at September  30, 2001,
compared to $232.0 million at December 31, 2000.  Fixed maturity  securities and
equity  securities  classified as  available-for-sale  totaled $252.7 million at
September  30, 2001.  Net  unrealized  investment  gains were $208,000 on equity
securities and $4.7 million on fixed maturity  securities at September 30, 2001.
The  fixed  maturity   portfolio   consisted  of  approximately   72%  municipal
securities,  23% corporate  securities,  and 5% U.S.  government  obligations at
September 30, 2001.

                                       12
<PAGE>

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


     The  Company's  loss  reserves  were $16.5  million at September  30, 2001,
compared to $15.0  million at December 31, 2000.  Reserves are  established  for
reported insurance losses and loss adjustment  expenses based on when notices of
default on insured  mortgage loans are received.  Reserves are also  established
for  estimated  losses  incurred on notices of default  not yet  reported by the
lender.  Consistent with industry practices, the Company does not establish loss
reserves for future  claims on insured loans which are not currently in default.
Reserves are established by management  using estimated claim rates  (frequency)
and claim amounts  (severity) to estimate ultimate losses. The reserving process
is periodically reviewed by management in order to provide a reasonable estimate
of losses on loans  currently in default.  Adjustments to reserve  estimates are
reflected in the financial  statements  in the periods in which the  adjustments
are made. During the third quarter of 2001,  management  refined its methodology
for setting  loss  reserves.  The  enhancements  made to the  reserving  process
incorporate  a more  multi-dimensional  analytical  form,  which gives effect to
current economic conditions and profiles delinquencies by such factors as policy
year,  geography,  and  chronic  late  payment  characteristics  in  addition to
profiling them by age. The growth in loss reserves is the result of the increase
in reported  defaults and the maturing of the Company's risk in force  mitigated
by favorable trends in the frequency and severity of paid claims.  The Company's
delinquency ratio, the ratio of delinquent insured loans to total insured loans,
was 0.80% at September  30, 2001,  compared to 0.60% at December 31, 2000.  Paid
claims  for the first nine  months of 2001 were $4.3  million  compared  to $5.3
million for the first nine months of 2001, a decline of 18.9%.

     Total  stockholders'  equity  increased to $238.0  million at September 30,
2001 from $199.8 million at December 31, 2000. This increase resulted  primarily
from net  income of $31.1  million  for the first  nine  months of 2001 and from
additional  paid-in  capital of $6.3  million  resulting  from the  exercise  of
employee stock options and the related tax benefit.

     Triad's total statutory  policyholders' surplus increased to $103.7 million
at September  30, 2001 from $101.0  million at December 31, 2000.  This increase
resulted  primarily  from  statutory  net income of $41.8  million  offset by an
increase  in the  statutory  contingency  reserve  of $30.9  million  and by the
adoption of new statutory accounting principles that went into effect on January
1, 2001.  Triad's  statutory  earned  surplus was $19.5 million at September 30,
2001,  compared to $17.3  million at December 31, 2000,  reflecting,  primarily,
growth in  statutory  net income  greater  than the  increase  in the  statutory
contingency reserve and the impact of the new statutory  accounting  principles.
The balance in the statutory contingency reserve was $181.7 million at September
30, 2001, compared to $150.8 million at December 31, 2000.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
claims-paying  ability  ratings  and the  adequacy of its capital in relation to
risk in force. A significant  reduction of capital or a significant  increase in
risk may impair  Triad's  ability  to write  additional  insurance.  A number of
states also  generally  limit Triad's  risk-to-capital  ratio to 25-to-1.  As of
September 30, 2001, Triad's  risk-to-capital ratio was 14.6-to-1, as compared to
14.8-to-1  at December 31, 2000,  and  11.2-to-1  for the industry as a whole at
December 31, 2000, the latest industry data available.

                                       13
<PAGE>

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

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

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

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

     Management's    Discussion   and   Analysis   and   this   Report   contain
forward-looking   statements  relating  to  future  plans,   expectations,   and
performance  which involve  various risks and  uncertainties,  including but not
limited to the following: interest rates may increase from their current levels;
housing  transactions  and  mortgage  issuance  may  decrease  for many  reasons
including changes in interest rates or economic conditions; the Company's market
share may change as a result of changes in underwriting  criteria or competitive
products  or rates;  the amount of new  insurance  written  could be affected by
changes in federal housing legislation, including changes in the Federal Housing
Administration  loan limits and coverage  requirements of Freddie Mac and Fannie
Mae;  the  Company's  financial  condition  and  competitive  position  could be
affected by legislation  impacting the mortgage guaranty  industry  specifically
and the  financial  services  industry in general;  rating  agencies  may revise
methodologies  for determining the Company's  claims-paying  ability ratings and
may  revise  or  withdraw  the  assigned  ratings  at  any  time;  decreases  in
persistency,  which are affected by loan refinancings in periods of low interest
rates,  may have an adverse  effect on  earnings;  the  amount of new  insurance
written  and the  growth of  insurance  in force or risk in force as well as the
performance  of  the  Company  may be  adversely  impacted  by  the  competitive
environment  in the private  mortgage  insurance  industry,  including the type,
structure,  and pricing of products and services  offered by the Company and its
competitors;  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;  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.  The United States is in an economic  downturn,
which could decrease demand for mortgage  insurance and cause loss experience to
suffer.

                                       14
<PAGE>

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


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

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

























                                       15
<PAGE>

         PART II

         ITEM 1.  LEGAL PROCEEDINGS - None

         ITEM 2.  CHANGES IN SECURITIES 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 6.    A.  EXHIBITS AND REPORTS ON FORM 8-K - None



                                   SIGNATURES

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

                                        TRIAD GUARANTY INC.


Date: November 14, 2001
                                        /s/ Michael R. Oswalt
                                        -------------------------------------
                                        Michael R. Oswalt
                                        Senior Vice President of Finance,
                                        Principal Accounting Officer


















                                       16