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, 1999

                                       or

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

                  For the transition period from _____ to _____



                         Commission File Number 0-22342

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


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

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

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

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

Number of shares of Common Stock, $.01 par value, outstanding  as of August 2,
1999: 13,292,694 shares.


<PAGE>





                               TRIAD GUARANTY INC.

                                      INDEX
                                                                           Page
                                                                          Number
Part I. Financial Information:

   Item 1. Financial Statements:

   Consolidated Balance Sheets as of June 30, 1999 (Unaudited)
            and December 31, 1998..............................................3

   Consolidated Income Statements for the Three and Six Month
            Periods Ended June 30, 1999 and 1998 (Unaudited)...................4

   Consolidated Statements of Cash Flow for the Six Month
            Periods Ended June 30, 1999 and 1998 (Unaudited)...................5

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

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

Part II. Other Information:

   Item 4. Submission of Matters to a Vote of Security Holders................17

   Item 6. Exhibits and Reports on Form 8-K...................................17

   Signatures.................................................................18


                                        2

<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           June 30,        December 31,
                                                             1999              1998
                                                        -------------     -------------
                                                         (Unaudited)
<S>                                                     <C>               <C>
Assets
Invested assets:
Fixed maturities, available-for-sale, at fair value ... $ 154,981,641     $ 157,391,829
Equity securities, available-for-sale, at fair value...    16,412,403        14,024,012
Short-term investments.................................     8,953,370         5,885,192
Other invested assets..................................     3,089,747                --
                                                        -------------     -------------
                                                          183,437,161       177,301,033

Cash...................................................        22,359           444,200
Real estate acquired in settlement of claims...........       145,515               ---
Accrued investment income..............................     2,366,934         2,258,878
Deferred policy acquisition costs......................    18,215,275        16,015,559
Property and equipment.................................     4,461,694         3,446,656
Prepaid reinsurance premium............................         9,898            14,703
Reinsurance recoverable................................        32,002           610,817
Other assets...........................................     5,767,667         5,163,924
                                                        -------------     -------------
Total assets........................................... $ 214,458,505     $ 205,255,770
                                                        =============     =============

Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses................ $  14,671,267     $  12,142,990
    Unearned premiums..................................     6,942,775         7,054,737
    Current taxes payable..............................        60,011            45,787
    Deferred income taxes..............................     8,044,660         7,930,878
    Unearned ceding commission.........................       475,049           621,161
    Long-term debt.....................................    34,459,480        34,457,080
    Accrued interest on debt...........................     1,274,972         1,274,972
    Accrued expenses and other liabilities.............     3,374,767         4,196,825
                                                        -------------     -------------
Total liabilities......................................    69,302,981        67,724,430
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; 13,292,694
      shares issued and outstanding at June 30, 1999
      and 13,408,869 at December 31, 1998..............       132,927           134,089
    Additional paid-in capital.........................    61,780,335        61,538,613
    Accumulated other comprehensive income, net
      of income tax liability (benefit) of ($27,403)
      at June 30, 1999 and $2,101,170 at
      December 31, 1998................................       (45,144)        3,907,920
    Deferred compensation..............................       (86,768)              ---
    Retained earnings..................................    83,374,174        71,950,718
                                                        -------------     --------------
Total stockholders' equity.............................   145,155,524       137,531,340
                                                        -------------     -------------
Total liabilities and stockholders' equity............. $ 214,458,505     $ 205,255,770
                                                        =============     =============
</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
                                                   --------------------------   ----------------------------
                                                        1999          1998          1999             1998
                                                        ----          ----          ----             ----
<S>                                                <C>            <C>           <C>             <C>
Revenue:
Premiums written:
   Direct..........................................$ 15,945,500   $12,765,965   $ 31,053,137    $ 24,335,699
   Assumed.........................................       3,677         3,106          9,309           8,927
   Ceded...........................................    (455,834)     (236,972)      (722,842)       (477,471)
                                                   ------------   -----------   ------------    ------------
Net premiums written...............................  15,493,343    12,532,099     30,339,604      23,867,155
Change in unearned premiums........................     (32,982)      126,749        107,157         721,949
                                                   ------------   -----------   ------------    ------------
Earned premiums....................................  15,460,361    12,658,848     30,446,761      24,589,104
Net investment income..............................   2,637,248     2,325,686      5,086,226       4,364,254
Realized investment gains..........................     175,239       158,750      1,032,240         274,264
Other income.......................................       5,135           569          9,444           1,039
                                                   ------------   -----------   ------------    ------------
                                                     18,277,983    15,143,853     36,574,671      29,228,661
Losses and expenses:
Losses and loss adjustment expenses................   1,353,935     1,102,813      4,275,940       2,582,517
Reinsurance recoveries.............................       1,055         3,955         (5,900)          1,483
                                                   ------------   -----------   ------------    ------------
Net losses and loss adjustment expenses............   1,354,990     1,106,768      4,270,040       2,584,000
Interest expense on debt...........................     702,479       692,302      1,394,917       1,169,190
Amortization of deferred policy acquisition costs..   1,752,797     1,362,618      3,469,262       2,635,326
Other operating expenses (net).....................   3,726,325     3,246,071      7,278,483       6,337,531
                                                   ------------   -----------   ------------    ------------
                                                      7,536,591     6,407,759     16,412,702      12,726,047
                                                   ------------   -----------   ------------    ------------
Income before income taxes.........................  10,741,392     8,736,094     20,161,969      16,502,614
Income taxes:
   Current.........................................       1,746           213         14,430             426
   Deferred........................................   3,294,717     2,691,127      6,123,355       5,074,238
                                                   ------------   -----------   ------------    ------------
                                                      3,296,463     2,691,340      6,137,785       5,074,664
                                                   ------------   -----------   ------------    ------------
Net income.........................................$  7,444,929   $ 6,044,754   $ 14,024,184    $ 11,427,950
                                                   ============   ===========   ============    ============

Earnings per common and
   common equivalent share:
   Basic...........................................    $.56           $.45         $1.05            $.86
                                                   ============   ===========   ============    ============
   Diluted.........................................    $.55           $.44         $1.03            $.82
                                                   ============   ===========   ============    ============
Shares used in computing earnings per
   common and common equivalent share:
   Basic...........................................  13,292,694    13,313,901     13,325,306      13,307,755
                                                   ============   ===========   ============    ============
   Diluted.........................................  13,576,596    13,866,624     13,631,947      13,868,608
                                                   ============   ===========   ============    ============
</TABLE>

                             See accompanying notes.


                                        4

<PAGE>

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

                                                                  Six Months Ended
                                                                       June 30
                                                            ---------------------------
                                                                1999            1998
                                                                ----            ----
<S>                                                         <C>             <C>
Operating activities
Net income................................................. $14,024,184     $11,427,950
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Loss and unearned premium reserves......................   2,416,315         237,695
   Accrued expenses and other liabilities..................    (947,460)        (44,140)
   Current taxes payable...................................      14,224               4
   Accrued investment income...............................    (197,803)       (613,343)
   Policy acquisition costs deferred.......................  (5,668,978)     (3,909,565)
   Amortization of policy acquisition costs................   3,469,262       2,635,326
   Net realized investment gains ..........................  (1,032,240)       (274,264)
   Provision for depreciation..............................     367,101         408,371
   Accretion of discount on investments....................    (540,376)       (456,009)
   Deferred income taxes...................................   2,242,355         122,720
   Accrued interest on debt................................         ---       1,167,444
   Real estate acquired in claim settlement................    (145,515)        141,999
   Other assets............................................    (603,743)       (860,688)
   Other operating activities..............................     607,920             ---
                                                            -----------     -----------
Net cash provided by operating activities..................  14,005,246       9,983,500
Investing activities
   Securities available-for-sale:
     Purchases - fixed maturities.......................... (22,712,451)    (55,453,677)
     Sales - fixed maturities..............................  19,418,026       7,529,296
     Purchases - equities..................................  (3,845,139)     (3,839,720)
     Sales - equities......................................   2,629,342       4,264,323
   Purchases of other invested assets......................  (3,000,000)            ---
   Purchases of property and equipment.....................  (1,384,399)       (778,697)
                                                            -----------     -----------
Net cash used in investing activities......................  (8,894,621)    (48,278,475)
Financing activities
Proceeds from issuance of long term debt...................         ---      34,493,752
Purchase and subsequent retirement of common stock.........  (2,602,187)            ---
Proceeds from exercise of stock options....................     137,899         185,163
                                                            -----------     -----------
Net cash (used in) provided by financing activities........  (2,464,288)     34,678,915
                                                            -----------     -----------
Net change in cash and short-term investments..............   2,646,337      (3,616,060)
Cash and short-term investments at beginning of period.....   6,329,392       8,694,399
                                                            -----------     -----------
Cash and short-term investments at end of period........... $ 8,975,729     $ 5,078,339
                                                            ===========     ===========
Supplemental schedule of cash flow information
Cash paid during the period for:
   Income taxes and United States Mortgage Guaranty
     Tax and Loss Bonds.................................... $ 3,881,205     $ 4,869,426
   Interest................................................ $ 1,382,500     $       ---
Non-cash investing and finance activities:
   Exchange of restricted common stock for
     intangible asset...................................... $       ---     $   298,125
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1999
                                   (Unaudited)


NOTE 1 -- THE COMPANY

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


NOTE  2 -- BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  Operating results for the three and six month periods ended June
30, 1999 are not necessarily  indicative of the results that may be expected for
the year  ending  December  31,  1999.  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, 1998.


NOTE 3 -- CONSOLIDATION

     The consolidated financial statements include the amounts of Triad Guaranty
Inc. and its wholly-owned subsidiaries, Triad Guaranty Insurance Corporation and
Triad  Guaranty  Assurance  Corporation,  a  wholly-owned  subsidiary  of  Triad
Guaranty  Insurance  Corporation.  All  significant  intercompany  accounts  and
transactions have been eliminated.


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

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

                                        6

<PAGE>


                               TRIAD GUARANTY INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                  June 30, 1999
                                   (Unaudited)


INSURANCE IN FORCE,  DIVIDEND  RESTRICTIONS,  AND STATUTORY  RESULTS - Insurance
regulations  limit the writing of mortgage  guaranty  insurance  to an aggregate
amount of insured risk no greater than twenty-five  times the total of statutory
capital and surplus and the  statutory  contingency  reserve.  The amount of net
risk for insurance in force at June 30, 1999 and December 31, 1998, as presented
below, was computed by applying the various percentage settlement options to the
insurance in force  amounts  based on the original  insured  amount of the loan.
Triad's ratio is as follows:


                                            June 30,             December 31,
                                              1999                   1998
                                              ----                   ----

Net risk............................   $  2,993,506,867       $  2,776,205,499
                                       ================       ================
Statutory capital and surplus.......   $     91,750,336       $     89,539,785
Statutory contingency reserve.......         96,895,092             81,614,277
                                       ----------------       ----------------
Total...............................   $    188,645,428       $    171,154,062
                                       ================       ================
Risk-to-capital ratio...............          15.9-to-1              16.2-to-1
                                       ================       ================


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

     Net income as determined in accordance with statutory  accounting practices
was  $18,021,213  for the six months ended June 30, 1999 and $31,252,891 for the
year ended December 31, 1998.

     At June 30, 1999 and December 31, 1998,  the amount of Triad's  equity that
could be paid out in dividends to  stockholders  was $8,034,409 and  $5,823,857,
respectively,  which was the  earned  surplus of Triad on a  statutory  basis on
those dates.

     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

                                        7

<PAGE>

                               TRIAD GUARANTY INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                  June 30, 1999
                                   (Unaudited)

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. Prior to
adoption of this  statement,  these  amounts  were  reported  as a component  to
stockholders'  equity. For the three month periods ended June 30, 1999 and 1998,
the  Company's   comprehensive   income  was  $4.9  million  and  $6.0  million,
respectively.  For the six month  periods  ended  June 30,  1999 and  1998,  the
Company's   comprehensive   income  was  $10.1   million   and  $11.3   million,
respectively.



















                                         8

<PAGE>

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


RESULTS OF OPERATIONS

     Net  income  for the first  six  months  of 1999  increased  22.7% to $14.0
million  compared to $11.4  million in the first six months of 1998.  Net income
for the second quarter of 1999 increased 23.2% to $7.4 million  compared to $6.0
million  for  the  second  quarter  of  1998.  This  improvement  was  primarily
attributable  to a 23.8%  (22.1%  in the  second  quarter)  increase  in  earned
premiums,  a 16.5%  (13.4% in the second  quarter)  increase  in net  investment
income, $1.0 million in realized investment gains, a favorable loss ratio and an
improved expense ratio.

     Net income per share on a diluted  basis  increased  24.8% to $1.03 for the
first six months of 1999 compared to $0.82 per share for the first six months of
1998. Net income per share for the second quarter of 1999 was $0.55 on a diluted
basis  compared  to $0.44  per  share  for the same  period  of 1998.  Operating
earnings  per share were $0.98 for the first half of 1999  compared to $0.81 for
the first half of 1998,  an increase of 20.8%.  Operating  earnings  exclude net
realized  investment  gains of  approximately  $1.0  million and $274,000 in the
first half of 1999 and 1998, respectively.

     Net new insurance written was $2.5 billion for the first six months of 1999
as  compared to $2.0  billion  for the first six months of 1998,  an increase of
20.8%. For the second quarter, net new insurance written totaled $1.1 billion in
1999 compared to $1.2 billion in 1998.  The Company also produced  approximately
$8 million of new insurance  written on seasoned loans in the first half of 1999
compared  to $171  million  in the same  period  of 1998.  The  increase  in new
insurance  written  was the  result of a strong  economy,  continued  geographic
expansion,  the  penetration of Triad's  products in the marketplace to both new
and existing  customers,  and the  introduction  of new  products.  According to
industry data,  Triad's national market share,  which is calculated based on net
new  insurance  written,  was 2.5% for the first six months of 1999  compared to
2.5% reported for the first six months of 1998 and 2.6% for all of 1998.

     The growth in new insurance  written also  reflects the favorable  interest
rate  environment  in the first six months of 1999 which  caused home buying and
refinance  activities  to remain  strong.  Refinance  activity  was 34.1% of new
insurance written in the first six months of 1999 compared to 33.8% in the first
six months of 1998.  Total direct  insurance in force  reached  $12.1 billion at
June 30, 1999, compared to $10.1 billion at June 30, 1998, an increase of 19.8%.

     Total direct  premiums  written were $31.1 million for the first six months
of 1999, an increase of 27.6% compared to $24.3 million for the first six months
of 1998. Net premiums written  increased by 27.1% to $30.3 million for the first
six months of 1999 compared to $23.9 million for the same period in 1998. Earned

                                        9

<PAGE>


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


premiums  increased 23.8% to $30.4 million for the first six months of 1999 from
$24.6  million  for the first six months of 1998.  This  growth in  written  and
earned premium  resulted from the increase in new insurance  written offset by a
decline in the Company's  persistency  rate. The Company's  persistency,  or the
percentage  of insurance  remaining  in force from one year prior,  was 66.6% at
June 30, 1999, compared to 70.0% at December 31, 1998.

     Net investment income for the first half of 1999 was $5.1 million,  a 16.5%
increase over $4.4 million for the same period in 1998.  Net  investment  income
for the  second  quarter of 1999 was $2.6  million,  a 13.4%  increase  over the
second  quarter of 1998.  This  increase in  investment  income is the result of
growth in the average book value of invested  assets by $35.7  million to $176.9
million at June 30, 1999,  from $141.2  million at June 30, 1998.  The growth in
average invested assets is attributable to normal operating cash flow. The yield
on average  invested  assets  declined  to 5.8% for the first six months of 1999
compared to 6.2% for the same period of 1998 reflecting the Company's  continued
investment  strategy to emphasize  tax  preferred  securities  which yield lower
pre-tax   rates  than  similar  fully  taxable   securities.   The   portfolio's
tax-equivalent  yield was 7.8% for the first six months of 1999 and 8.0% for the
first six months of 1998.  Approximately  72% or $113.0 million of the Company's
fixed  maturity  portfolio at June 30, 1999, was composed of state and municipal
tax-preferred securities as compared to 68% at June 30, 1998.

     The Company's loss ratio (the ratio of incurred losses to earned  premiums)
was 14.0% for the first  six  months of 1999 as  compared  to 10.5% for the same
period of 1998 and 13.3% for all of 1998. The loss ratio was 8.8% for the second
quarter of 1999 compared to 8.7% for the second  quarter of 1998.  The Company's
favorable  loss ratio  reflects the low level of  delinquencies  compared to the
number of insured  loans and the fact that  approximately  80% of the  Company's
insurance  in force was  originated  in the last 36 months.  The increase in the
loss ratio in the first half of 1999 reflects both the higher number of reported
delinquencies  and the impact that low persistency  has had on earned  premiums.
Management  believes,  based upon its experience and industry data,  that claims
incidence for it and other private mortgage insurers is generally highest in the
third through sixth years after loan origination. Although the claims experience
on new insurance written in previous years has been quite favorable, the Company
expects its incurred  losses to increase as a greater amount of its insurance in
force reaches its anticipated highest claim frequency years. Due to the inherent
uncertainty  of future premium  levels,  losses,  economic  conditions and other
factors that impact  earnings,  it is  impossible  to predict with any degree of
certainty the impact of such higher claims frequencies on future earnings.

     During periods of  significant  refinancing  activity,  it is possible that
policies on stronger  loans may lapse and that weaker loans may remain in force,
thus  potentially  increasing  the loss  ratio on  older  business.  Substantial

                                       10

<PAGE>


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


increases  in  production  of new business  during these  periods can offset the
increased loss ratio on the older business.

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased by 65.2% in the first six months of 1999 to $4.3  million  compared to
$2.6  million  in the first six months of 1998.  Net losses and loss  adjustment
expenses  for the  second  quarter of 1999 and 1998 were $1.4  million  and $1.1
million,  respectively.  This  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 higher claim frequency years.

     Amortization  of deferred  policy  acquisition  costs increased by 31.6% to
$3.5  million in the first six months of 1999  compared to $2.6  million for the
first six months of 1998.  These costs were $1.8 million for the second  quarter
of 1999  compared to $1.4 for the second  quarter of 1998, an increase of 28.6%.
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 a higher  cancellation rate due to refinance  activity during the first half
of 1999.

     Other operating  expenses increased 14.8% to $7.3 million for the first six
months of 1999 as compared to $6.3 million for the same period in 1998.  For the
second quarter of 1999, other operating  expenses increased to $3.7 million from
$3.2  million in the second  quarter  of 1998.  This  increase  in  expenses  is
primarily attributable to advertising, personnel, facilities and equipment costs
required to support the Company's product development,  technology enhancements,
geographic expansion and increased production.

     The expense ratio (ratio of underwriting  expenses to net premiums written)
for the first six months of 1999 was 35.4%  compared  to 37.6% for the first six
months of 1998 and  35.4%  for all of 1998.  The  expense  ratio for the  second
quarter  of  1998  improved  to  35.4%  from  36.8%  reported  a  year  earlier.
Contributing to this  improvement is the higher level of written premiums in the
first half of 1999 partially offset by the increase in expenses.

     The  effective  tax rate for the first half of 1999 was 30.4%  compared  to
30.8% in the first half of 1998.  This  decrease is primarily  the result of the
increase in  investment  in tax  preferred  securities.  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.


                                       11

<PAGE>


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


LIQUIDITY AND CAPITAL RESOURCES

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

     The Company generated positive cash flow from operating  activities for the
first six months of 1999 of $14.0  million  compared  to $10.0  million  for the
first six months of 1998.  The increase in Triad's  operating cash flow reflects
the growth in renewal  premiums and insurance  written that has more than offset
the increases in claims paid, interest, and other 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 as of the end of the preceding fiscal year and limit
the amount of dividends  that may be paid without prior approval of the Illinois
Insurance Department.  The Illinois Insurance Department permits expenses of the
parent company to be reimbursed by Triad in the form of management fees.

     Consolidated  invested  assets  were  $183.4  million  at  June  30,  1999,
including  $171.4  million  classified  as  available-for-sale.  Net  unrealized
investment  gains were $2.7  million  on equity  securities  and net  unrealized
investment  losses were $2.8 million on fixed  maturity  securities  at June 30,
1999.  The fixed maturity  portfolio  consisted of  approximately  72% municipal
securities,  23% corporate securities,  4% U.S. government  obligations,  and 1%
mortgage-backed bonds at June 30, 1999.

     The Company's  loss  reserves  increased to $14.7 million at June 30, 1999,
compared to $12.1 million at December 31, 1998. This growth is the result of the
increases in new  insurance  written and the maturing of the  Company's  risk in
force.  Consistent with industry practices,  the Company does not establish loss
reserves for future  claims on insured loans which are not currently in default.
The  Company's  reserves  per  delinquent  loan were  $21,100 at June 30,  1999,

                                       12

<PAGE>


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


compared to $23,400 at December 31, 1998. The Company's  delinquency  ratio, the
ratio of reported  delinquent insured loans to total insured loans, was 0.67% at
June 30, 1999, compared to 0.53% at December 31, 1998.

     The Company's  unearned  premium  reserve of $6.9 million at June 30, 1999,
decreased  from $7.1  million at December  31,  1998.  This decline is primarily
attributable to the continued  production of the monthly premium product,  which
produces little unearned premium compared to annual and single premium products.
Cancellation  activity also can contribute to the decrease in unearned premiums,
whereby  older  annual  premium  policies  are  canceled  or replaced by monthly
premium policies.

     Total  stockholders'  equity  increased to $145.2 million at June 30, 1999,
from $137.5 million at December 31, 1998. This increase resulted  primarily from
net  income  of $14.0  million  for the first  six  months  of 1999  offset by a
decrease  in  net   unrealized   gains  on   invested   assets   classified   as
available-for-sale  of $4.0  million (net of income tax) and the  retirement  of
146,000 shares of the Company's stock purchased for $2.6 million.

     Triad's total statutory  policyholders'  surplus increased to $91.8 million
at June 30,  1999,  from $89.5  million at  December  31,  1998.  This  increase
resulted  primarily  from  statutory  net income of $18.0  million  offset by an
increase  in  the  statutory  contingency  reserve  of  $15.3  million.  Triad's
statutory  earned  surplus was $8.0 million at June 30,  1999,  compared to $5.8
million at December 31,  1998,  reflecting  growth in  statutory  net income and
unrealized gains on equity securities greater than the increase in the statutory
contingency reserve. Approximately $2.0 and $1.9 million of the statutory earned
surplus for June 30, 1999, and December 31, 1998, respectively, was attributable
to unrealized gains. The balance in the statutory  contingency reserve was $96.9
million at June 30, 1999, compared to $81.6 million at December 31, 1998.

     The  Company is  undertaking  modifications  and  upgrades  to enhance  its
computer systems and  technological  capabilities.  The Company expects to incur
between   $3.0  to  $4.0  million  for  this  system   conversion   and  upgrade
(approximately  $2.8  million in  capitalized  costs have been  incurred for the
project through June 30, 1999) and is funding the project through cash flow from
operations.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
claims-paying  ability  ratings  and the  adequacy of its capital in relation to
risk in force. A significant  reduction of capital or a significant  increase in
risk may impair  Triad's  ability  to write  additional  insurance.  A number of
states also generally limit Triad's risk-to-capital ratio to 25-to-1. As of June
30, 1999, and December 31, 1998, Triad's risk-to-capital ratio was 15.9-to-1 and
16.2-to-1, respectively, as compared to 14.8-to-1 for the industry as a whole at
December 31, 1998, the latest industry data available.

                                       13

<PAGE>


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


YEAR 2000 ISSUE

     The Company is  dependent  on processes  that have been  automated  and are
completely  handled by computers.  In the past,  computer  programs were written
using only two digits to  identify a year in the date field.  Although  this has
worked well it could present  problems as companies  move into the year 2000 due
to the fact that the two digits "00" may be read as "1900"  rather than  "2000".
This technical  problem may cause computer  programs to fail or create erroneous
results.

     In 1997, the Company began conducting a review and analysis of all computer
hardware and software and created a plan to address potential  problems relating
to Year 2000  concerns.  Due to the fact that Triad began  operations  less than
twelve years ago the  Company's  hardware and software  represent,  for the most
part, relatively new technology. As computer programs have been created, in many
cases,  programmers  have had the  foresight  to  include a 4-digit  year.  Many
programs  and   equipment   have  only  recently  been  added  to  the  existing
configuration.  The Company has concluded its  assessment of potential Year 2000
issues  and  believes  that its  internal  exposure  to Year 2000  concerns  are
minimal.

     STATE OF READINESS.  The Company defines 'Year 2000 Compliant' to mean that
hardware and  software  will  continue to work  accurately  and without  failure
before,  during  and after the date  changes  to  January  1, 2000 with  neither
functionality  nor performance  being affected by the date change.  With this as
the Company's  goal,  the plan developed to ensure that the Company is Year 2000
compliant has six major steps:  1) define  possible  problem areas,  2) research
potential  issues,  3)  make  corrections,  4)  conduct  preliminary  tests,  5)
implement final changes, 6) review and complete testing. As a part of this plan,
the Company  maintains  communication  with its strategic  business partners and
customers to advise of its progress and subsequent  completion of its compliance
testing.

     The first step involves  identifying every aspect of the Company's business
that may be computerized  or may interface with a process that is  computerized.
Research  includes  contacting  hardware  and software  vendors/suppliers.  Each
vendor/supplier  has been required to present  evidence of Year 2000  compliance
for all hardware and software  licensed for use by the Company.  In a few cases,
the Company's  equipment was not compliant and  replacements/upgrades  have been
initiated.

     In late 1997, the Company began testing its operating software and programs
written  in-house.  The  review of this  internal  software  was  completed  and
modifications  were made and tested. The Company has worked with all interfacing
partners and customers to test both Triad's changes and the changes  implemented
by its business  partners and customers.  Telecommunication  equipment and other
peripherals  not  normally  associated  with  computer  systems  have  also been
verified and tested. The Company has complied with requirements put forth by the
government sponsored enterprises ("GSEs") and has been an active participant in

                                       14

<PAGE>


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


the MBA Year 2000 Readiness Project.  As of March 31, 1999, the Company believes
that its major systems are Year 2000 compliant.

     COSTS.  For the most part,  the Company's  existing  computer  systems were
originally  developed  to be Year  2000  compliant.  The  current  hardware  and
software have not required a significant overhaul to become Year 2000 compliant.
As part of the  Company's  Year 2000  compliance  plan,  internal  personnel and
outside  resources  were used to address the  identified  hardware  and software
issues  necessary  to  ensure  compliance.  Expenses  relating  to the Year 2000
compliance  testing are expensed as incurred and are immaterial.  As of June 30,
1999,  the project is complete  with the  exception  of final  contingency  plan
implementations.

     RISKS.  Should any of the Company's  efforts to become Year 2000  compliant
prove to be  inadequate  or  ineffective,  possible  interruptions  to  critical
business operations could occur. Many of the critical business functions involve
processes that can be accomplished through multiple methods. While the Company's
primary method of operation  involves the transmission and receipt of electronic
data,  it also has the  capability  to handle  most of its  processes  manually.
Should there be a Year 2000 problem with the  electronic  transmission  process,
the Company expects that it would be able to substitute  manual processing until
the  electronic  means  could  be  recovered.   For  instance,  loan  and  claim
submissions  are  primarily  non-electronic.  All internal  processes  have been
thoroughly tested; however,  should a problem occur,  non-complex subsystems are
available which should allow for quick recovery. The Company's internal analysts
and  developers  who have been integral in the testing of the Company's  systems
are expected to be available to assist in handling any disruptions.  The Company
also relies on many external  parties to provide critical pieces to its business
functions.  Although these external  parties have verified their individual Year
2000 compliance,  the Company could  potentially be adversely  affected if their
computer systems are disrupted by the Year 2000 problem.

     CONTINGENCY PLANS. The Company's  contingency plan is designed to limit, as
much as possible,  the disruption that a failure  relating to Year 2000 concerns
could cause. The Company is assessing all critical business functions,  weighing
whether or not each can be delayed,  and  prioritizing  their  degree of impact.
Because the Company's business processes go well beyond the automated functions,
all employees are involved in the contingency  planning process.  As part of the
contingency plan the Company is performing employee skill assessments,  updating
documentation,  cross  training  employees  and  developing  methods to manually
handle  processes  that may fail  electronically.  Special  Year  2000  employee
guidelines   are  being   created  to  convey  to  all  Company   employees  the
expectations,  responsibilities,  and authority levels necessary. The Company is
also  reviewing  alternate   communication  methods  and  reevaluating  security
measures of current systems. The Company's  development,  testing and assessment
of its contingency plan will continue through 1999.


                                       15

<PAGE>


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


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

     Management's  Discussion  and  Analysis  and this  Report  contain  forward
looking statements relating to future plans, expectations, and performance which
involve  various  risks and  uncertainties,  including  but not  limited  to the
following:  interest  rates may  increase  from their  current  levels;  housing
transactions  and mortgage  issuance  may  decrease  for many reasons  including
changes in interest rates or economic conditions; the Company's market share may
change as a result of changes in underwriting  criteria or competitive  products
or rates;  the amount of new  insurance  written could be affected by changes in
federal  housing   legislation,   including   changes  in  the  Federal  Housing
Administration  loan limits and coverage  requirements of Freddie Mac and Fannie
Mae;  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
Company's  performance  may be  impacted  by changes in the  performance  of the
financial markets and general economic conditions. Economic downturns in regions
where Triad's risk is more concentrated could have a particularly adverse effect
on Triad's financial condition and loss development. Accordingly, actual results
may differ from those set forth in the forward- looking statements. Attention is
also directed to other risk factors set forth in documents  filed by the Company
with the Securities and Exchange Commission.



                                       16

<PAGE>



PART II

         ITEM 1.  LEGAL PROCEEDINGS - NONE

         ITEM 2.  CHANGES IN SECURITIES - NONE

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES - NONE

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The  Annual  Meeting  of  Stockholders  was  held on May 13,  1999.  Shares
entitled to vote at the Annual Meeting totaled  13,292,694,  of which 12,100,140
shares were represented at the meeting.

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


         Name of Nominee          Number of Votes for      Authorization
                                                             Withheld
         Robert T. David              12,072,890              27,250
         Raymond H. Elliott           12,072,890              27,250
         William T. Ratliff,III       12,072,890              27,250
         Darryl W. Thompson           12,069,278              30,862
         David W. Whitehurst          12,072,890              27,250


     No other  matters  came  before  the  Annual  Meeting  or any  adjournments
thereof.

         ITEM 5.  OTHER INFORMATION - NONE

         ITEM 6.    A.  EXHIBITS

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
















                                       17

<PAGE>





                                   SIGNATURES

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

                                                TRIAD GUARANTY INC.


Date: August 13, 1999
                                                /s/ Michael R. Oswalt
                                                -------------------------
                                                Michael R. Oswalt
                                                Vice President and Controller,
                                                Principal Accounting Officer





















                                       18