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

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

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

                  For the quarterly period ended June 30, 2003

                                       or

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

                 For the transition period from ______ to _____


                         Commission File Number 0-22342

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

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


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

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

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

Number of shares of Common Stock,  $.01 par value,  outstanding  as of August 1,
2003: 14,328,900 shares.

<PAGE>
                               TRIAD GUARANTY INC.

                                      INDEX
                                                                            Page
                                                                          Number
Part I. Financial Information:

     Item 1. Financial Statements:

         Consolidated Balance Sheets as of June 30, 2003 (Unaudited)
                  and December 31, 2002.....................................  3

         Consolidated Income Statements for the Three and Six Months
                  Ended June 30, 2003 and 2002 (Unaudited).................   4

         Consolidated Statements of Cash Flows for the Six Months
                  Ended June 30, 2003 and 2002 (Unaudited).................   5

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

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

     Item 3. Quantitative and Qualitative Disclosures about Market Risk....  23

     Item 4. Controls and Procedures.......................................  23

Part II. Other Information:

     Item 1. Legal Proceedings............................................   24

     Item 2. Changes in Securities and Use of Proceeds.....................  24

     Item 3. Defaults Upon Senior Securities...............................  24

     Item 4. Submission of Matters to a Vote of Security Holders...........  24

     Item 5. Other Information.............................................  24

     Item 6. Exhibits and Reports on Form 8-K..............................  24

     Signatures and Certifications of the Chief Executive Officer and Chief
                  Financial Officer of the Company........................   25

                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                          June 30,        December 31,
                                                                            2003             2002
                                                                         ----------       -----------
                                                                        (Unaudited)
(Dollars in thousands except per share information)

Assets
<S>                                                                       <C>               <C>
Invested assets:
     Fixed maturities, available-for-sale, at fair value..............    $339,003          $298,470
     Equity securities, available-for-sale, at fair value.............      10,911            10,808
     Short-term investments...........................................      27,202            35,303
                                                                          --------          --------
                                                                           377,116           344,581

Cash .................................................................       5,562               233
Real estate...........................................................         414             1,561
Accrued investment income.............................................       3,816             3,088
Deferred policy acquisition costs.....................................      30,239            28,997
Prepaid federal income taxes..........................................      87,723            77,786
Property and equipment................................................       9,150             9,533
Reinsurance recoverable...............................................       1,243               396
Other assets..........................................................      18,772            16,711
                                                                          --------          --------
Total assets..........................................................    $534,035          $482,886
                                                                          ========          ========

Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses...............................    $ 24,399          $ 21,360
    Unearned premiums.................................................      11,681             8,539
    Amounts payable to reinsurer......................................       2,741             3,415
    Current taxes payable.............................................       1,041               598
    Deferred income taxes.............................................     106,453            94,241
    Unearned ceding commission........................................       1,028             1,386
    Long-term debt....................................................      34,482            34,479
    Accrued interest on debt..........................................       1,275             1,275
    Accrued expenses and other liabilities............................       8,653             8,186
                                                                          --------          --------
Total liabilities.....................................................     191,753           173,479

Commitments and contingent liabilities - Note 4
Stockholders' equity:
    Preferred stock, par value $.01 per share --- authorized
       1,000,000 shares; no shares issued and outstanding.............         ---               ---
    Common stock, par value $.01 per share --- authorized
       32,000,000 shares; issued and outstanding 14,292,692 shares
       at June 30, 2003 and 14,159,601 at December 31, 2002...........         143               142
    Additional paid-in capital........................................      83,277            80,169
    Accumulated other comprehensive income, net of income
       tax liability of $7,681 at June 30, 2003 and $4,646 at
       December 31, 2002..............................................      14,245             8,634
    Deferred compensation.............................................     (1,486)             (658)
    Retained earnings.................................................     246,103           221,120
                                                                          --------          --------
Total stockholders' equity............................................     342,282           309,407
                                                                          --------          --------
Total liabilities and stockholders' equity............................    $534,035          $482,886
                                                                          ========          ========
</TABLE>

                             See accompanying notes.

                                       3
<PAGE>
                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                             Three Months Ended              Six Months Ended
                                                                   June 30                        June 30
                                                          -------------------------       ----------------------
                                                             2003            2002            2003         2002
                                                             ----            ----            ----         ----
(Dollars in thousands except per share information)
<S>                                                        <C>             <C>             <C>          <C>
Revenue:
Premiums written:
   Direct...........................................       $ 37,878        $ 29,784        $ 71,904     $ 57,622
   Assumed..........................................              -               1               1            2
   Ceded............................................         (6,497)         (4,494)        (12,385)      (7,842)
                                                           --------        --------        --------     --------
Net premiums written................................         31,381          25,291          59,520       49,782
Change in unearned premiums.........................         (3,115)            208          (3,123)         252
                                                           --------        --------        --------     --------
Earned premiums.....................................         28,266          25,499          56,397       50,034
Net investment income...............................          4,333           3,953           8,666        7,717
Realized investment gains (losses)..................            546            (729)            765       (2,228)
Other income........................................              4              15              17           42
                                                           --------        --------        --------     --------
                                                             33,149          28,738          65,845       55,565
Losses and expenses:
Losses and loss adjustment expenses.................          5,378           2,875          10,647        5,396
Reinsurance recoveries..............................              2               4              (2)          (1)
                                                           --------        --------        --------     --------
Net losses and loss adjustment expenses.............          5,380           2,879          10,645        5,395
Interest expense on debt............................            693             693           1,386        1,386
Amortization of deferred policy acquisition costs...          4,024           3,059           7,442        6,045
Other operating expenses (net)......................          5,169           5,764          11,009       11,833
                                                           --------        --------        --------     --------
                                                             15,266          12,395          30,482       24,659
                                                           --------        --------        --------     --------
Income before income taxes .........................         17,883          16,343          35,363       30,906
Income taxes:
   Current..........................................            182             172             353          332
   Deferred.........................................          5,070           4,881          10,027        9,246
                                                           --------        --------        --------     --------
                                                              5,252           5,053          10,380        9,578
                                                           --------        --------        --------     --------
Net income..........................................       $ 12,631        $ 11,290        $ 24,983     $ 21,328
                                                           ========      ==========        ========      =======
Earnings per common and
   common equivalent share:
   Basic............................................       $    .88        $    .80        $   1.75     $   1.53
                                                           ========        ========        ========     ========
   Diluted..........................................       $    .87        $    .78        $   1.73     $   1.49
                                                           ========        ========        ========     ========
Shares used in computing earnings
   per common and common equivalent share:
   Basic............................................     14,278,727      14,115,220      14,250,145   13,976,165
                                                         ==========      ==========      ==========   ==========
   Diluted..........................................     14,451,403      14,390,101      14,425,274   14,295,372
                                                         ==========      ==========      ==========   ==========
</TABLE>
                             See accompanying notes.

                                       4

<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                    Six Months Ended
                                                                        June 30
                                                               ------------------------
                                                                2003              2002
                                                                ----              ----
(Dollars in thousands)

Operating activities
<S>                                                            <C>              <C>
Net income.................................................    $24,983          $21,328
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Loss adjustment expense and unearned premium reserves...      6,181              577
   Accrued expenses and other liabilities..................     (2,740)           5,397)
   Current taxes payable...................................        443              478
   Amounts due to/from reinsurer...........................     (1,540)            (706)
   Accrued investment income...............................       (728)              35
   Policy acquisition costs deferred.......................     (8,684)          (8,771)
   Amortization of policy acquisition costs................      7,442            6,045
   Net realized investment (gains) losses..................       (765)           2,228
   Provision for depreciation..............................      1,402            1,424
   Accretion of discount on investments....................     (2,098)          (2,137)
   Deferred income taxes...................................     10,027            9,246
   Prepaid federal income tax..............................     (9,937)          (6,806)
   Unearned ceding commission..............................       (358)            (463)
   Real estate acquired in claim settlement................      1,147             (343)
   Other assets............................................     (2,042)            (144)
   Other operating activities..............................        328              198
                                                               -------          -------
Net cash provided by operating activities..................     23,061           16,792
Investing activities
 Securities available-for-sale:
      Purchases - fixed maturities.........................    (60,359)         (46,879)
      Sales - fixed maturities.............................     34,238           24,382
      Purchases - equities.................................       (547)          (2,040)
      Sales - equities.....................................        736            1,035
   Net change in short-term investments....................      8,101            1,710
   Purchase of property and equipment......................     (1,019)          (1,050)
                                                               -------          -------
Net cash used in investing activities......................    (18,850)         (22,842)

Financing activities
Proceeds from exercise of stock options....................      1,118            5,268
                                                               -------          -------
Net cash provided by financing activities..................      1,118            5,268
                                                               -------          -------
Net change in cash ........................................      5,329             (782)
Cash at beginning of period................................        233              853
                                                               -------          -------
Cash at end of period......................................    $ 5,562          $    71
                                                               =======          =======

Supplemental schedule of cash flow information
Cash paid during the period for:
   Income taxes and United States Mortgage
     Guaranty Tax and Loss Bonds...........................    $10,401          $ 7,306
   Interest................................................    $ 1,383          $ 1,383
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>
                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                   (Unaudited)

NOTE 1 -- THE COMPANY

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


NOTE  2 -- ACCOUNTING POLICIES AND BASIS OF PRESENTATION

     BASIS OF PRESENTATION - The accompanying  unaudited  consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United  States for interim  financial  information  and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not  include  all  of the  information  and  footnotes  required  by  accounting
principles  generally  accepted  in the  United  States for  complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Operating results for the three and six months ended June 30, 2003 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December 31, 2003. For further  information,  refer to the  consolidated
financial  statements and footnotes  thereto included in the Triad Guaranty Inc.
annual report on Form10-K for the year ended December 31, 2002.

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








                                       6
<PAGE>

                              TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                   (Unaudited)


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


                                       Three Months Ended     Six Months Ended
                                            June 30,              June 30,
                                        2003       2002        2003       2002
                                     ------------------------------------------
  Net income - as reported           $ 12,631   $ 11,290    $ 24,983   $ 21,328
  Net income - pro forma             $ 12,461   $ 11,079    $ 24,638   $ 20,906
  Earnings per share - as reported:
     Basic                           $   0.88   $   0.80    $   1.75   $   1.53
     Diluted                         $   0.87   $   0.78    $   1.73   $   1.49
  Earnings per share - pro forma:
     Basic                           $   0.87   $   0.78    $   1.73   $   1.50
     Diluted                         $   0.86   $   0.77    $   1.71   $   1.46


NOTE 3 -- CONSOLIDATION

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


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

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

                                       7
<PAGE>
                              TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                   (Unaudited)


INSURANCE IN FORCE,  DIVIDEND  RESTRICTIONS,  AND STATUTORY  RESULTS - Insurance
regulations  generally  limit the writing of mortgage  guaranty  insurance to an
aggregate amount of insured risk no greater than 25 times the total of statutory
capital and surplus and the  statutory  contingency  reserve.  The amount of net
risk for insurance in force at June 30, 2003 and December 31, 2002, as presented
below, was computed by applying the various  percentage  settlement  options and
applicable  stop-loss  parameters to the insurance in force amounts based on the
original insured amount of the loan. Triad's ratio is as follows:

                                             June 30,         December 31,
                                               2003               2002
                                          ------------        -----------
(Dollars in thousands)
Net risk................................   $ 5,892,766        $ 5,534,420
                                           ===========        ===========
Statutory capital and surplus...........   $   120,578        $   112,874
Statutory contingency reserve...........       273,566            245,006
                                           -----------        -----------
Total...................................   $   394,144        $   357,880
                                           ===========        ===========
Risk-to-capital ratio...................     15.0-to-1          15.5-to-1
                                           ===========        ===========

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

     Net income as determined in accordance with statutory accounting principles
was $33.2  million and $27.8  million for the six months ended June 30, 2003 and
2002, respectively, and $61.8 million for the year ended December 31, 2002.

     At June 30, 2003 and December 31, 2002,  the amount of Triad's  equity that
could be paid out in  dividends  to  stockholders  was $36.9  million  and $29.2
million,  respectively,  which was the earned  surplus  of Triad on a  statutory
basis on those dates.

                                       8
<PAGE>
                              TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003
                                   (Unaudited)


LOSS  RESERVES - The  Company  establishes  loss  reserves  to  provide  for the
estimated  costs of  settling  claims  with  respect to loans  reported to be in
default  and loans in  default  which  have not been  reported  to the  Company.
Reserves are established by management  using estimated claim rates  (frequency)
and claim amounts  (severity) to estimate ultimate losses. The reserving process
gives effect to current economic  conditions and profiles  delinquencies by such
factors as policy year, geography, chronic late payment characteristics and age.
Due to the  inherent  uncertainty  in  estimating  reserves  for losses and loss
adjustment  expenses,  there can be no assurance that the reserves will prove to
be adequate to cover ultimate loss development.

LITIGATION  - A class action  lawsuit has been filed  against the Company in the
ordinary course of the Company's  business  alleging that contract  underwriting
and captive  reinsurance  violate the Real Estate Settlement  Procedures Act. In
the opinion of management,  the ultimate  resolution of this pending  litigation
will not have a material adverse effect on the financial  position or results of
operations of the Company.


NOTE 5 - - EARNINGS PER SHARE

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


NOTE 6 - - COMPREHENSIVE INCOME

     Comprehensive income consists of net income and other comprehensive income.
For the Company,  other comprehensive  income is composed of unrealized gains or
losses on available-for-sale securities, net of income tax. For the three months
ended  June 30,  2003 and 2002,  the  Company's  comprehensive  income was $17.2
million and $15.1 million,  respectively. For the six months ended June 30, 2003
and  2002,  the  Company's  comprehensive  income  was $30.6  million  and $24.3
million, respectively.


NOTE 7 - - INCOME TAXES

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

                                       9
<PAGE>

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

RESULTS OF OPERATIONS

     Net  income  for the first  six  months  of 2003  increased  17.1% to $25.0
million  or $1.73 per  diluted  share  compared  to $21.3  million  or $1.49 per
diluted share in the first six months of 2002. Net income for the second quarter
of 2003  increased  11.9% to $12.6 million or $0.87 per diluted share from $11.3
million  or  $0.78  per  diluted  share in the  second  quarter  of  2002.  This
improvement  in net  income  was led by a 12.7%  (10.8% in the  second  quarter)
increase in earned premiums and a 12.3% (9.6% in the second quarter) increase in
net  investment  income.  Net income  for the first six months of 2003  includes
$765,000,  or $0.03 per diluted share, of net realized  investment gains,  while
net income for the first six months of 2002 included $2.2 million,  or $0.10 per
diluted share, of net realized investment losses. For the second quarter of 2003
and  2002,  net  income  includes  $546,000  or $0.02 per  diluted  share of net
realized  investment  gains  and  $729,000  or $0.04  per  diluted  share of net
realized investment losses, respectively.

     Operating earnings for the first six months of 2003 increased 7.5% to $24.5
million  from $22.8  million  for the first six  months of 2002.  For the second
quarter of 2003,  operating  earnings increased 4.4% to $12.3 million from $11.8
million in the second quarter of 2002. Operating earnings per share on a diluted
basis were $1.70 for the first six  months of 2003  compared  to $1.59 per share
for the first six months of 2002, an increase of 6.5%. For the second quarter of
2003,  operating  earnings per share on a diluted  basis were $0.85  compared to
$0.82 for the second  quarter of 2002, an increase of 3.9%.  Operating  earnings
and  operating  earnings per diluted  share are non-GAAP  measures.  The Company
defines operating earnings as net income excluding net realized investment gains
and losses,  net of related taxes.  Management  believes  operating earnings and
operating  earnings per diluted share are relevant and useful  information,  and
they are primary  measurements  used by  management  in assessing  the Company's
performance.  Net realized  investment  gains and losses are dependent on market
conditions,  and  management  believes  that they are not strong  indicators  of
trends in  operations.  Operating  earnings and  operating  earnings per diluted
share results should not be considered as a substitute  for net income  prepared
in accordance  with GAAP and may not be comparable to similarly  titled measures
reported by other companies.



                                       10
<PAGE>

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


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

--------------------------------------------------------------------------------
                                        Three months ended    Six months ended
(In thousands, except per share data)       June 30,               June 30,
                                         2003       2002       2003       2002
--------------------------------------------------------------------------------
Net income                             $12,631    $11,290    $24,983    $21,328
Net realized investment (gains)
  losses, net of tax                      (355)       473      (497)      1,448
                                       -------    -------    -------    -------
Operating earnings                     $12,276    $11,763    $24,486    $22,776
                                       =======    =======    =======    =======

Diluted earnings per share               $0.87      $0.78      $1.73      $1.49
Net realized investment (gains)
  losses, net of tax, per share          (0.02)      0.04      (0.03)      0.10
                                       -------    -------    -------    -------
Operating earnings per diluted share     $0.85      $0.82      $1.70      $1.59
                                       =======    =======    =======    =======
--------------------------------------------------------------------------------


     Total  insurance  written was $8.6 billion for the first six months of 2003
compared to $6.2 billion for the first six months of 2002, an increase of 38.6%.
For the  second  quarter  of 2003,  total  insurance  written  was $4.9  billion
compared  to $3.5  billion  for the  comparable  period of 2002,  an increase of
40.6%.  Total  insurance  written  includes  insurance  written  attributable to
traditional  flow  production and insurance  written  attributable to structured
bulk transactions.

     Traditional  flow  insurance  written in the first  half of 2003  increased
52.2% to $8.3  billion  from $5.5  billion  in the first  half of 2002.  For the
second quarter of 2003,  traditional flow insurance  written  increased 73.9% to
$4.7 billion from $2.7 billion for the comparable  period of 2002. This increase
was  primarily  the result of expanding  relationships  with  national  lenders,
strong demand for risk-sharing  arrangements and other product offerings,  and a
lower interest rate  environment  that  contributed  to a very strong  refinance
market.

     Insurance  written  in  the  first  six  months  of  2003  attributable  to
structured  bulk  transactions  totaled $322 million ($186 million in the second
quarter)  compared to $766 million (all in the second quarter) in the first half
of 2002.  Structured  bulk  transactions  are  generally  initiated by secondary
mortgage  market  participants  who wish to use  mortgage  insurance as a credit
enhancement.  The Company  competes  against other mortgage  insurers as well as
other  forms of  credit  enhancement  provided  by  capital  markets  for  these
transactions.  Insurance  written  attributed to structured bulk transactions is
likely to vary  significantly  from period to period due to the relatively small
number of transactions that encompass this market (as opposed to the traditional
flow market),  competitiveness with other mortgage insurers,  the attractiveness
in  the  marketplace  of  mortgage   insurance  versus  other  forms  of  credit

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


enhancements, and the changing loan composition and underwriting criteria of the
market.  Although  terms vary, the bulk market can be broadly  categorized  into
three different  segments or tiers depending on the risk  characteristics of the
loans comprising a transaction.  The loan  characteristics of the three segments
are: 1) predominantly  high credit quality,  low LTV, fully  underwritten  loans
that may have niche  characteristics  such as  non-conforming  loan balances and
geographic concentrations;  2) loans that generally have high credit quality and
low to moderate  LTVs that have been  underwritten  with reduced or  streamlined
documentation;  and, 3) generally fully  underwritten loans with credit impaired
borrowers  (FICO  credit  score less than 575).  The Company has  evaluated  all
segments of the bulk market and, as of June 30,  2003,  approximately  4% of the
Company's  insurance in force  attributable to structured  bulk  transactions is
categorized in segment 3.

     The  Company   periodically  enters  structured   transactions  which  have
effective dates of coverage within the current reporting period; however, due to
the  timing  of  the  submission  of  the  detailed  loan   information,   these
transactions  are not  reflected in the  Company's  inforce and related  account
totals  until loan level  detail is reported to the  Company.  During the second
quarter of 2003,  the Company  wrote  approximately  $1.0  billion of  insurance
written attributable to structured bulk transactions that has not been reflected
in  reported  insurance  in  force  and  related  accounts  for the  quarter  or
year-to-date  due  to  the  timing  of  the  submission  of  the  detailed  loan
information.  These  amounts  will be reported in insurance in force and related
accounts  during the third quarter of 2003. The Company has,  however,  properly
included in premium  written and premium earned the  respective  amounts due and
earned  by the  Company  during  the  second  quarter  of 2003  related  to this
insurance.

     Consolidation   within  the  mortgage   origination  industry  and  Triad's
continued  focus on national  lenders has  resulted in a greater  percentage  of
production  volume  being  concentrated  among  a  smaller  customer  base.  The
Company's ten largest  customers were  responsible  for 75% of traditional  flow
insurance  written in the first six months of 2003  compared to 72% in the first
half of  2002  and 73% in all of  2002.  The  Company's  two  largest  customers
generated 59% of traditional  flow insurance  written in the first six months of
2003 compared to 53% in the first half of 2002 and 53% in all of 2002.  The loss
of one or more of these major customers could have a significant  adverse effect
on the Company's business.

     According  to  industry  data,  Triad's  national  market  share of net new
primary  insurance  written,  which includes  insurance written on a traditional
flow basis as well as that attributed to structured bulk transactions, increased
to 4.3%  for the  first  six  months  and 4.7% for the  second  quarter  of 2003
compared to 3.4% and 3.2% for the respective  periods of 2002.  Triad's national
market share of net new primary  insurance  written on a traditional  flow basis
was 5.4% for the  second  quarter  and 5.1% for the  first  six  months  of 2003
compared to 4.1% for both respective  periods of 2002. Net new primary insurance
written  excludes  insurance  placed  upon loans more than 12 months  after loan
origination,  insurance  placed upon loans already  covered by primary  mortgage
insurance,  and insurance placed upon loans where lender exposure is effectively
reduced below defined minimums.

                                       12
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     Total direct  insurance in force  reached  $26.9  billion at June 30, 2003,
compared to $25.4  billion at December 31, 2002,  and $23.8  billion at June 30,
2002.  Significant  refinance  activity  in 2002 and in the  first  half of 2003
resulted in a high level of policy  cancellations that substantially  offset the
impact that the high level of  insurance  written had on in force  growth.  As a
result,  insurance in force  increased by only $1.5 billion in the first half of
2003,  even  though  insurance  written  during  the first six  months  was $8.6
billion.

     FICO  credit  scores  are  one of  the  factors  used  by  the  Company  in
determining  credit risk.  The  following  table  presents the FICO credit score
distribution  of the Company's  insurance in force at June 30, 2003 and December
31, 2002.

-------------------------------------------------------------------------------
                          Percent of Insurance In Force

                                     June 30, 2003       December 31, 2002
                                     -------------       -----------------


Credit score less than 575               1.0%                   0.9%

Credit score between 575 and 619         5.0%                   4.8%

Credit score greater than 619            94.0%                 94.3%
-------------------------------------------------------------------------------


As the table shows,  the Company insures some loans that have FICO credit scores
below 575. The Company  believes that these loans have a higher  probability  of
loss than a loan with a FICO credit  score of 575 or greater.  The Company  does
not expect loans with FICO scores less than 575 to become a significant  portion
of its insurance in force and  currently  only insures these loans with existing
lender customers.

     Total direct  premiums  written were $71.9 million for the first six months
of 2003,  an increase of 24.8% from $57.6 million for the  comparable  period of
2002.  Direct premiums written for the second quarter of 2003 increased 27.2% to
$37.9  million from $29.8  million in the second  quarter of 2002.  Net premiums
written increased by 19.6% to $59.5 million in the first six months of 2003 from
$49.8 million for the comparable  period of 2002.  Net premiums  written for the
second  quarter of 2003  increased  24.1% to $31.4 million from $25.3 million in
the second quarter of 2002.

     The difference  between direct premiums written and net premiums written is
primarily  attributable  to ceded  premium.  Driven by an increase in  insurance
subject to lender  risk-sharing  arrangements,  ceded premiums written increased
57.9% to $12.4  million  for the first six months of 2003 from $7.8  million for
the first six months of 2002.  Ceded  premiums  written in the second quarter of
2003 were $6.5 million  compared to $4.5 million for the same period of 2002, an
increase of 44.6%. The Company also continues to maintain $125 million of excess
of loss reinsurance  coverage for which the payment is included in ceded premium
written. The Company's premium cede rate (the ratio of ceded premiums written to
total  direct  premiums  written)  was 17.2% in both the  first  half and in the

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


second  quarter of 2003 compared to 13.6% in the first half of 2002 and 15.1% in
the  second  quarter  of 2002.  The  Company's  premium  cede  rate for  captive
reinsurance  (the ratio of ceded  premiums  written  under  captive  reinsurance
arrangements to total direct premiums written) was 14.7% in the first six months
of 2003 (14.9% in the second quarter)  compared to 11.6% in the first six months
of 2002 (12.2% in the second quarter).  The average premium cede rate for direct
premiums written subject to the Company's captive  reinsurance  arrangements was
34.2% for the first six months of 2003 (35.4% in the second quarter) compared to
36.3%  in  the  first  six  months  of  2002  (36.1%  in  the  second  quarter).
Approximately  46% of flow  insurance  written (44% of total  insurance  written
including structured bulk transactions) during the first half of 2003 is subject
to  risk-sharing  arrangements  compared to 50% of flow  insurance  written (44%
including structured bulk transactions) in the same period of 2002. Through June
30, 2003, insurance written attributable to structured bulk transactions has not
been subject to captive mortgage reinsurance or other risk-sharing arrangements.
Approximately  48% of  direct  insurance  in force is  subject  to  risk-sharing
arrangements  at June 30, 2003,  compared to 41% at June 30, 2002. This increase
in insurance in force subject to  risk-sharing  arrangements is due primarily to
the increased market penetration of the Company's risk-sharing  arrangements and
the high level of refinance  activity during the past twelve months, as policies
that were previously not subject to risk-sharing arrangements refinanced and new
policies   issued  were  subject  to   risk-sharing   arrangements.   Management
anticipates ceded premiums will continue to increase as a result of the expected
increase in risk-sharing programs.

         Under the Company's excess of loss lender risk-sharing arrangements,
the reinsurer may elect a risk band with a flexible entry and exit point. One of
the Company's competitors announced that effective April 1, 2003, it will not
participate in excess of loss risk-sharing arrangements where the net premium
cede rate is greater than 25% ("deep ceded"). The Company believes that its
risk-sharing arrangements provide valuable reinsurance protection and
potentially reduce the risk of volatility in the Company's earnings. The Company
plans to continue to participate in excess of loss risk-sharing arrangements,
including deep ceded arrangements. It is uncertain at this time what impact, if
any, the competitor's decision to not participate in deep ceded excess of loss
risk-sharing arrangements will have on the Company's direct insurance in force
subject to risk-sharing arrangements and the Company's market share.

     Earned  premiums  increased 12.7% to $56.4 million for the first six months
of 2003 from $50.0 million for the comparable  period of 2002.  Earned  premiums
for the  second  quarter of 2003  increased  10.8% to $28.3  million  from $25.5
million in the second quarter of 2002. The variance between net written premiums
and earned premiums is due to the significant  writings of the Company's  annual
premium product for the quarter and the related increase to the unearned premium
reserve.  The Company's unearned premium liability increased to $11.7 million at
June 30, 2003 from $8.6 million at March 31, 2003.  Direct written  premium from
the annual premium product  represented  17.5% of direct premium written for the
second quarter of 2003 compared to 5.4% for the respective  quarter of 2002. The
growth in  written  and  earned  premiums  resulted  from  strong  levels of new
insurance written offset by the impact of a declining  persistency rate due to a
high level of mortgage refinancings and by the increase in ceded premiums.

                                       14
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     Reflecting  the record low interest  rate  environment  in place during the
first half of 2003,  refinance  activity  increased to 56.3% of total  insurance
written (56.0% excluding  structured bulk  transactions) in the first six months
of 2003 from 39.9% of total insurance  written (40.1% excluding  structured bulk
transactions) in the first six months of 2002.  Refinance  activity was 55.3% of
total insurance  written (55.1% excluding  structured bulk  transactions) in the
second  quarter of 2003  compared  to 33.0% of total  insurance  written  (31.4%
excluding structured bulk transactions) in the same period of 2002. Persistency,
or the  percentage of insurance in force  remaining  from 12 months  prior,  was
54.6% at June 30, 2003 compared to 60.9% at December 31, 2002, and 62.4% at June
30, 2002.  The high level of refinance  activity and the  resulting  decrease in
persistency is reflective of the low interest rate  environment that has been in
place during the past year. Low  persistency  results in an  acceleration of the
amortization  of deferred  policy  acquisition  costs and a reduction in renewal
premiums.  The annualized quarterly  persistency run rate for the second quarter
of 2003 was 33.6%  compared to 50.8% for the first quarter of 2003 and 65.5% for
the second quarter of 2002.

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

     Net investment income for the first six months of 2003 was $8.7 million,  a
12.3% increase over $7.7 million in the first six months of 2002. Net investment
income for the second quarter of 2003 was $4.3 million  compared to $4.0 million
in second  quarter of 2002, an increase of 9.6%.  This increase is the result of
growth in the average book value of invested  assets by $57.0  million to $343.8
million  at June  30,  2003  from  $286.8  million  at June 30,  2002,  which is
attributable to the investment of normal  operating cash flow. The pre-tax yield
on average invested assets, calculated on the basis of amortized cost, decreased
to 5.0% for the first  six  months  of 2003  compared  to 5.4% for the first six
months of 2002. The portfolio's  tax-equivalent  yield-to-maturity  was 7.5% for
the first half of 2003 versus 7.9% for the first half of 2002.  The  decrease in
yields reflects the low interest rate environment for new money investments made
over the past several  quarters and the disposal of a number of higher  yielding
securities  during the past twelve months to enhance the overall  quality of the
portfolio. The portfolio's yield was also affected by a higher percentage of the
fixed income portfolio  invested in municipal  securities.  Based on fair value,
approximately 83% and 77% of the Company's fixed maturity  portfolio at June 30,
2003 and 2002,  respectively,  was composed of state and municipal tax-preferred
securities.  Both at June 30, 2003 and June 30, 2002,  approximately  95% of the

                                       15
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


Company's  fixed  maturity  portfolio,  based on fair  value,  was either a U.S.
government or U.S. agency  obligation or was rated  investment grade by at least
one nationally recognized securities rating organization.  U.S. government, U.S.
agency, and investment grade securities  generally have a lower yield, in return
for less default risk, than securities rated below investment grade.

     The Company reported $765,000 of net realized investment gains in the first
six months of 2003 and $2.2  million of net  realized  investment  losses in the
same  period of 2002.  For the second  quarter  of 2003,  the  Company  reported
$546,000 of net realized  investment  gains compared to $729,000 of reported net
realized  investment  losses in the second quarter of 2002. The Company actively
monitors investment securities considered to be at risk for impairment. When the
Company determines that a decline in the value of a security below its amortized
cost is  other-than-temporary,  an impairment loss has occurred. In the event of
impairment,  the Company  writes down the cost basis of the security to its fair
value and  recognizes  a  realized  loss for the  amount of the  writedown.  Net
realized gains of $765,000 during the second half of 2003 included approximately
$600,000 of impairment  writedowns.  Net realized  gains of $546,000  during the
second  quarter  of  2003  included  an  impairment   writedown  on  a  bond  of
approximately $175,000.

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased by 97.3% in the first half of 2003 to $10.6  million from $5.4 million
for the same period of 2002. Net losses and loss  adjustment  expenses were $5.4
million in the second  quarter of 2003  compared  to $2.9  million in the second
quarter of 2002,  an increase of 86.8%.  This rise  reflects an increase in paid
losses and  delinquent  loans as the Company's  insurance in force grows and the
condition  of the economy  remains  weak.  Net paid  losses and loss  adjustment
expenses  were $7.6  million  in the first six months of 2003  compared  to $4.6
million in the first six  months of 2002.  Net paid  losses and loss  adjustment
expenses  were $4.0 million in the second  quarter of 2003, up from $2.4 million
in the second quarter of 2002.  Average  severity (direct paid losses divided by
number of  claims  paid)  for the  first  six  months of 2003 was  approximately
$22,000  compared with $22,500 for the respective  period of 2002. The Company's
loss ratio (the ratio of incurred  losses to earned  premiums) was 18.9% for the
first  half of 2003  compared  to 10.8% for the first half of 2002 and 13.4% for
all of 2002.  The loss ratio was 19.0% in the  second  quarter of 2003 and 11.3%
for the second quarter of 2002.

     As of June 30, 2003,  approximately 88% of the Company's insurance in force
was  originated  in the  last  36  months  compared  to 78% at  June  30,  2002.
Management  believes,  based upon its experience and industry data,  that claims
incidence  for  traditional  flow  business  is  generally  highest in the third
through sixth years after loan  origination.  Furthermore,  management  believes
that the  period  of  highest  claim  incidence  for  business  attributable  to
structured bulk transactions is earlier than that for traditional flow business.
The Company  expects its incurred  losses to increase as a greater amount of its
insurance  in force  reaches its  anticipated  highest  claim  frequency  years.
Furthermore,  changes in the  economic  environment  could  accelerate  paid and
incurred loss  development.  Due to the inherent  uncertainty  of future premium
levels, losses, economic conditions,  and other factors that affect earnings, it
is difficult  to predict with any degree of certainty  the impact of such higher
claim frequencies on future earnings.

                                       16
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     Amortization  of deferred  policy  acquisition  costs increased by 23.1% to
$7.4 million in the first six months of 2003 from $6.0 million for the first six
months of 2002.  These costs  increased  31.5% in the second  quarter of 2003 to
$4.0 million from $3.1  million in the second  quarter of 2002.  The increase in
amortization reflects growth in deferred policy acquisition costs related to the
expansion of the Company's  insurance in force and accelerated  amortization due
to higher  cancellations  from refinance activity in the first half of 2003. The
Company's model calculates the amortization of deferred policy acquisition costs
separately  for each  book  year.  The model  accelerates  the  amortization  of
deferred policy  acquisition costs through a dynamic adjustment when persistency
for a book year is lower than a historical  baseline level in order to match the
amortization  expense  with the life of the  policies  on which the  acquisition
costs were  originally  deferred.  Low  persistency  levels during the first six
months of 2003 and 2002 resulted in additional  amortization  of deferred policy
acquisition costs through dynamic adjustments totaling $1.2 million in the first
half of 2003 ($922,000 in the second  quarter) and $431,000 in the first half of
2002 ($305,000 in the second quarter).

     Other operating expenses decreased 7.0% to $11.0 million for the first half
of 2003 from $11.8 million for the same period of 2002.  For the second  quarter
of 2003, other operating  expenses were $5.2 million compared to $5.8 million in
the second quarter of 2002, a decrease of 10.3%.  The decline in other operating
expenses is primarily the result of operational  efficiencies  achieved  through
the  use  of  technology.  The  Company  has  made  substantial  investments  in
technology  that allows  increased  insurance  writings  without a  proportional
increase in operating expenses.  The expense ratio (ratio of the amortization of
deferred policy  acquisition costs and other operating  expenses to net premiums
written)  for the first half of 2003 was 31.0%  compared  to 35.9% for the first
half of 2002 and 34.6% for all of 2002. The expense ratio for the second quarter
of 2003 was  29.3%  compared  to  34.9%  in the  second  quarter  of  2002.  The
improvement  in the  expense  ratios  was  impacted  by  both  positive  expense
development  and the  increase  in net  written  premium  which was  affected by
increased production of the annual premium product.

     The effective tax rate for the first six months of 2003 was 29.4%  compared
to 31.0% for the first six months of 2002. The effective tax rate for the second
quarter of 2002 was 29.4%  compared to 30.9% for the second quarter of 2002. The
decrease in the effective tax rate is due primarily to an increase in tax-exempt
interest  resulting  from a  higher  percentage  of  assets  being  invested  in
tax-preferred securities. Management expects the Company's effective tax rate to
remain near current levels or decline  slightly as long as yields from new funds
invested  in  tax-preferred  securities  remain  favorable  in relation to fully
taxable securities.

LIQUIDITY AND CAPITAL RESOURCES

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

                                       17
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     The Company generated positive cash flow from operating  activities for the
first  half of 2003 of $23.1  million  compared  to $16.8  million  for the same
period of 2002.  The increase in  operating  cash flow in the first half of 2003
reflects  the  growth in  premiums  and  investment  income  and a  decrease  in
underwriting  expenses paid offset  partially by an increase in losses paid. The
Company's business does not routinely require significant  capital  expenditures
other  than  for  enhancements  to  its  computer   systems  and   technological
capabilities. Positive cash flows are invested pending future payments of claims
and expenses.  Cash flow  shortfalls,  if any,  could be funded through sales of
short-term investments and other investment portfolio securities.

     The parent company's cash flow is dependent on interest income and payments
from Triad including  management fees and interest payments under surplus notes.
The Illinois  Insurance  Department permits expenses of the parent company to be
reimbursed by Triad in the form of management fees. Payment of dividends is also
permitted, although none have been paid to date.

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

     Consolidated  invested assets were $377.1 million at June 30, 2003 compared
to $344.6  million at December 31, 2002.  Fixed  maturity  securities and equity
securities classified as  available-for-sale  totaled $349.9 million at June 30,
2003  compared to $309.3  million at December  31,  2002.  Contributing  to this
increase in invested assets and securities classified as available-for-sale  was
an increase in net unrealized investment gains on fixed maturity securities from
year-end  levels and a net unrealized  investment  gain on equity  securities at
June 30, 2003  compared to a net  unrealized  investment  loss at year-end.  Net
unrealized  investment gains on fixed maturity  securities were $21.3 million at
June 30, 2003  compared to $13.7  million at December 31, 2002.  Net  unrealized
investment gains on equity securities were $589,000 at June 30, 2003 compared to
a net unrealized investment loss of $458,000 at December 31, 2002. Based on fair
value, the fixed maturity  portfolio  consisted of  approximately  83% municipal
securities, 14% corporate securities, and 3% U.S. government obligations at June
30, 2003 compared to a composition  of 81% municipal  securities,  15% corporate
securities, and 4% U.S. government obligations at December 31, 2002.

     The Company's loss and loss adjustment  expense reserves were $24.4 million
at June 30, 2003 compared to $21.4  million at December 31, 2002.  Loss and loss
adjustment  expense  reserves are  established for all insured loans reported as
delinquent to the Company by the loan  servicer.  Reserves also are  established
for  estimated  losses  incurred on notices of default  not yet  reported by the
servicer.  Consistent  with industry  practices,  the Company does not establish
loss  reserves  for future  claims on insured  loans that are not  currently  in
default.  The growth in loss  reserves is the result of the increase in reported

                                       18
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


defaults.  The Company  expects  loss  reserves  and the number of flow and bulk
loans in default to  continue  to grow,  reflecting  the growth and aging of its
insurance in force.

         The following table shows default statistics as of June 30, 2003 and
December 31, 2002:

-------------------------------------------------------------------------------

                                                   Default Statistics

                                                        June 30    December 31
                                                           2003           2002
                                                           ----           ----
Number of insured loans in force......................  205,046        190,480
Number of loans in default............................    3,351          2,379
Percentage of loans in default (default rate).........    1.63%          1.25%
Number of insured loans in force excluding bulk loans.  189,161        171,723
Number of loans in default excluding bulk loans.......    2,510          2,120
Percentage of loans in default excluding bulk loans...    1.33%          1.23%
Number of bulk loans in force.........................   15,885         18,757
Number of bulk loans in default.......................      841            259
Percentage of bulk loans in default...................    5.29%          1.38%

-------------------------------------------------------------------------------

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

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

                                       19
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


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

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

     Total  stockholders'  equity  increased to $342.3  million at June 30, 2003
from $309.4 million at December 31, 2002. This increase resulted  primarily from
net income of $25.0  million  for the first half of 2003 and from an increase in
unrealized gains on investments, net of tax, of $5.6 million.

     Triad's total statutory  policyholders' surplus increased to $120.6 million
at June 30, 2003 from $112.9  million at December  31, 2002.  Triad's  statutory
earned surplus increased to $36.9 million at June 30, 2003 from $29.2 million at
December 31, 2002. The increase in Triad's statutory  policyholders' surplus and
statutory earned surplus resulted, primarily, from statutory net income of $33.2
million which exceeded the net increase in the statutory  contingency reserve of
$28.6  million.  The  balance in the  statutory  contingency  reserve was $273.6
million at June 30, 2003 compared to $245.0 million at December 31, 2002.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
financial  strength  ratings and the adequacy of its capital in relation to risk
in force. A significant  reduction of capital or a significant  increase in risk
may impair Triad's  ability to write  additional  insurance.  A number of states
also generally limit Triad's  risk-to-capital  ratio to 25-to-1.  As of June 30,
2003,  Triad's  risk-to-capital  ratio was  15.0-to-1  compared to  15.5-to-1 at
December 31, 2002,  and to 11.1-to-1 for the industry as a whole at December 31,
2001,  the  latest  industry  data  available.   The  risk-to-capital  ratio  is
calculated  using net risk in force,  which takes into  account risk ceded under
reinsurance  arrangements  including captive risk-sharing  arrangements,  as the
numerator and statutory capital, which includes statutory policyholders' surplus
and the balance in the contingency reserve, as the denominator.  The decrease in
Triad's  risk-to-capital  ratio  is due to a  higher  growth  rate in  statutory
capital than that in net risk in force.

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

                                       20
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     Fannie Mae is in the  process of revising  its  approval  requirements  for
mortgage  insurers.  The new  requirements,  which have not yet been  finalized,
would require prior  approval by Fannie Mae for many of Triad's  activities  and
new products,  allow for other  approved  types of mortgage  insurers rated less
than  "AA," and give  Fannie  Mae  increased  rights to revise  the  eligibility
standards of mortgage insurers.  The final form the eligibility  guidelines will
take is unknown  at this  time,  but new  guidelines,  if issued,  could have an
adverse effect on the Company.

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

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

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

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

                                       21
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


       o  the amount of  insurance  written and the growth in insurance in force
          or risk in  force as well as the  performance  of the  Company  may be
          adversely  impacted  by the  competitive  environment  in the  private
          mortgage  insurance  industry,  including  the  type,  structure,  and
          pricing  of  products  and  services  offered by the  Company  and its
          competitors;
       o  if the  Company  fails to  properly  underwrite  mortgage  loans under
          contract underwriting service agreements,  the Company may be required
          to assume the costs of repurchasing those loans;
       o  with consolidation  occurring among mortgage lenders and the Company's
          concentration  of insurance in force generated  through  relationships
          with significant lender customers,  the loss of a significant customer
          may have an adverse effect on earnings;
       o  the  Company's   performance   may  be  impacted  by  changes  in  the
          performance of the financial markets and general economic conditions;
       o  economic  downturns in regions where Triad's risk is more concentrated
          could  have  a  particularly   adverse  effect  on  Triad's  financial
          condition and loss development;
       o  OFHEO  risk-based  capital  rules could  severely  limit the Company's
          ability  to  compete  against  various  types  of  credit   protection
          counterparties, including "AAA" rated private mortgage insurers;
       o  changes in the  eligibility  guidelines  of Fannie Mae or Freddie  Mac
          could have an adverse effect on the Company;
       o  proposed regulation by the Department  ofHousing and Urban Development
          to exclude  packages of real  estate  settlement  services,  which may
          include any required mortgage insurance premium paid at closing,  from
          the anti-referral  provisions of the Real Estate Settlement Procedures
          Act could adversely affect the Company's earnings.

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













                                       22
<PAGE>




ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RIsk

     The Company's  market risk  exposures at June 30, 2003 have not  materially
changed from those identified at December 31, 2002.


ITEM 4.       CONTROLS AND PROCEDURES


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

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




                                       23
<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

     The  Annual  Meeting  of  Stockholders  was  held on May 22,  2003.  Shares
entitled to vote at the Annual Meeting  totaled  14,272,494 of which  13,854,764
shares were represented at the meeting.

     The following six directors were elected at the Annual Meeting.  Also shown
are the number of shares cast for and authorization withheld for each nominee.

        Name of Nominee           Number of Votes for    Authorization withheld
        ---------------           -------------------   -----------------------
        Robert T. David                     13,809,028                45,736

        Michael A. F. Roberts               13,787,291                67,473

        William T. Ratliff, III             13,581,615               273,149

        Richard S. Swanson                  13,788,791                65,973

        Darryl W. Thompson                  10,953,803             1,923,846

        David W. Whitehurst                 10,747,446             3,107,318


ITEM 5. OTHER INFORMATION - None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a)  EXHIBITS

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

   (b) REPORTS ON FORM 8-K
               On July 23, 2003,  the Company filed a current  report on Items 7
               and 9 of Form 8-K  relating  to the  issuance  of its  results of
               operations  for the  second  quarter  ended  June 30,  2003 in an
               earnings release.

                                       24

<PAGE>

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


                                   SIGNATURES

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

                                         TRIAD GUARANTY INC.
                                         -------------------

Date: August 14, 2003

                                          /s/ Michael R. Oswalt
                                          ---------------------
                                          Michael R. Oswalt
                                          Senior Vice President and Treasurer,
                                          Principal Accounting Officer







                                       25

<PAGE>
Form 10-Q

                                 CERTIFICATIONS


I, Darryl W. Thompson, certify that:

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

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

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

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

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

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

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

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

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

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

                                       26
<PAGE>





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



         August 14, 2003

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














                                       27

<PAGE>

Form 10-Q
                                 CERTIFICATIONS


I, Ron D. Kessinger, certify that:

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

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

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

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

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

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

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

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

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

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

                                       28
<PAGE>




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



         August 14, 2003

                                          /s/ Ron D. Kessinger
                                          ----------------------
                                          Ron D. Kessinger
                                          Executive Vice President and
                                          Chief Financial Officer

















                                       29