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

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

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

                  For the quarterly period ended March 31, 2002

                                       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 May 1, 2002:
14,092,197 shares.

<PAGE>

                               TRIAD GUARANTY INC.

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

    Item 1. Financial Statements:

    Consolidated Balance Sheets as of March 31, 2002 (Unaudited)
       and December 31, 2001................................................. 3

    Consolidated Income Statements for the Three Month
       Periods Ended March 31, 2002 and 2001 (Unaudited)..................... 4

    Consolidated Statements of Cash Flow for the Three Month
       Periods Ended March 31, 2002 and 2001 (Unaudited)....................  5

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

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

Part II. Other Information:

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

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















                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      March 31,    December 31,
                                                                        2002           2001
                                                                     -----------   ------------
                                                                           (Unaudited)
(Dollars in thousands except per share information)
Assets
Invested assets:
<S>                                                                     <C>           <C>
Fixed maturities, available-for-sale, at fair value ...............     $255,459      $245,986
Equity securities, available-for-sale, at fair value...............       12,782        12,476
Short-term investments.............................................       18,208        18,739
                                                                        --------      --------
                                                                         286,449       277,201

Cash...............................................................        1,876           854
Real estate........................................................           64           162
Accrued investment income..........................................        2,982         3,196
Deferred policy acquisition costs..................................       27,549        25,944
Prepaid federal income taxes ......................................       63,634        62,619
Property and equipment.............................................       11,166        11,169
Reinsurance recoverable............................................          924             5
Other assets.......................................................       15,286        15,305
                                                                        --------      --------
Total assets.......................................................     $409,930      $396,455
                                                                        ========      ========
Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses............................     $ 18,246      $ 17,991
    Unearned premiums..............................................        7,624         7,650
    Amounts payable to reinsurer ..................................        2,145         2,445
    Current taxes payable..........................................          415            40
    Deferred income taxes..........................................       74,749        74,773
    Unearned ceding commission.....................................        2,089         2,324
    Long-term debt.................................................       34,475        34,473
    Accrued interest on debt.......................................          584         1,275
    Accrued expenses and other liabilities.........................        5,876         9,415
                                                                        --------      --------
Total liabilities..................................................      146,203       150,386

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 14,092,197
      shares at March 31, 2002 and 13,691,672
      at December 31, 2001.........................................          141           137
    Additional paid-in capital.....................................       78,262        69,057
    Accumulated other comprehensive income, net of income
      tax liability of $71 at March 31, 2002 and
      $522 at December 31, 2001....................................          138           975
    Deferred compensation..........................................         (870)         (118)
    Retained earnings..............................................      186,056       176,018
                                                                        --------      --------
Total stockholders' equity.........................................      263,727       246,069
                                                                        --------      --------
Total liabilities and stockholders' equity.........................     $409,930      $396,455
                                                                        ========      ========
</TABLE>
                             See accompanying notes.

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

<TABLE>
<CAPTION>

                                                          Three Months Ended
                                                                March 31
                                                     -------------------------
(Dollars in thousands except per share information)      2002           2001
                                                     -----------    ----------
Revenue:
<S>                                                  <C>            <C>
Premiums written:
   Direct..........................................      $27,838       $21,793
   Assumed.........................................            2             2
   Ceded...........................................       (3,348)       (1,983)
                                                     -----------    ----------
Net premiums written...............................       24,492        19,812
Change in unearned premiums........................           43          (129)
                                                     -----------    ----------
Earned premiums....................................       24,535        19,683
Net investment income..............................        3,764         3,476
Realized investment gains (losses).................       (1,499)          452
Other income.......................................           27         1,867
                                                     -----------    ----------
                                                          26,827        25,478
Losses and expenses:
Losses and loss adjustment expenses................        2,521         2,199
Reinsurance recoveries.............................           (5)            4
                                                     -----------    ----------
Net losses and loss adjustment expenses............        2,516         2,203
Interest expense on debt...........................          693           693
Amortization of deferred policy acquisition costs..        2,986         2,334
Other operating expenses (net).....................        6,069         4,351
                                                     -----------    ----------
                                                          12,264         9,581
                                                     -----------    ----------
Income before income taxes.........................       14,563        15,897
Income taxes:
   Current.........................................          160            --
   Deferred........................................        4,365         4,977
                                                     -----------    ----------
                                                           4,525         4,977
                                                     -----------    ----------
Net income.........................................      $10,038       $10,920
                                                     ===========    ==========

Earnings per common and common equivalent share:
   Basic...........................................      $ .73         $ .82
                                                     ===========    ==========
   Diluted.........................................      $ .71         $ .79
                                                     ===========    ==========

Shares used in computing earnings per common
  and common equivalent share:
   Basic...........................................   13,834,467    13,354,873
                                                      ==========    ==========
   Diluted.........................................   14,197,999    13,830,431
                                                      ==========    ==========
</TABLE>

                             See accompanying notes.

                                       4
<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                  March 31
                                                          ----------------------
(Dollars in thousands)                                      2002          2001
                                                          --------      --------
Operating activities
<S>                                                       <C>           <C>
Net income.............................................   $ 10,038      $ 10,920
Adjustments to reconcile net income to net
  cash provided by operating activities:
   Loss and unearned premium reserves..................        229         1,213
   Accrued expenses and other liabilities..............     (6,687)       (3,331)
   Current taxes payable...............................        375            --
   Amounts due to/from reinsurer.......................     (1,237)       (1,293)
   Accrued investment income...........................        214          (239)
   Policy acquisition costs deferred...................     (4,591)       (3,204)
   Amortization of policy acquisition costs............      2,986         2,334
   Net realized investment losses (gains) .............      1,499          (452)
   Provision for depreciation..........................        676           518
   Accretion of discount on investments................     (1,025)         (632)
   Deferred income taxes...............................      4,365         4,977
   Prepaid federal income tax..........................     (1,015)         (580)
   Unearned ceding commission..........................       (235)        1,702
   Real estate acquired in claim settlement............         98          (329)
   Accrued interest on debt............................       (691)         (691)
   Other assets........................................        132           324
   Other operating activities..........................         94            24
                                                          --------      --------
Net cash provided by operating activities..............      5,225        11,261

Investing activities
Securities available-for-sale:
    Purchases - fixed maturities.......................    (25,551)      (26,251)
    Sales - fixed maturities...........................     17,464        10,735
    Purchases - equities...............................       (817)       (1,512)
    Sales - equities...................................        417         1,405
  Purchase of property and equipment...................       (673)       (1,323)
                                                          --------      --------
Net cash used in investing activities..................     (9,160)      (16,946)

Financing activities
Proceeds from exercise of stock options................      4,426            25
                                                          --------      --------
Net cash provided by financing activities..............      4,426            25
                                                          --------      --------
Net change in cash and short-term investments..........        491        (5,660)
Cash and short-term investments at beginning of period.     19,593        18,525
                                                          --------      --------
Cash and short-term investments at end of period.......    $20,084       $12,865
                                                          ========      ========

Supplemental schedule of cash flow information
Cash paid during the period for:
    Income taxes and United States Mortgage
       Guaranty Tax and Loss Bonds.....................    $ 1,228         $ 580
    Interest...........................................    $ 1,383       $ 1,383
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002
                                   (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  or  investors  to  protect  the lender or  investor  against  loss from
defaults on low down payment residential mortgage loans.


NOTE  2 -- BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information  and with the  instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information  and footnotes  required by accounting  principles  generally
accepted in the United States for complete financial statements.  In the opinion
of  management,  all  adjustments  (consisting  of  normal  recurring  accruals)
considered  necessary  for a fair  presentation  have been  included.  Operating
results for the three months ended March 31, 2002 are not necessarily indicative
of the results that may be expected for the year ending  December 31, 2002.  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, 2001.


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.  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

                                       6

<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002
                                   (Unaudited)


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.

INSURANCE IN FORCE, DIVIDEND RESTRICTIONS, AND STATUTORY RESULTS - Insurance
regulations limit the writing of mortgage guaranty insurance to an aggregate
amount of insured risk no greater than 25 times the total of statutory capital
and surplus and the statutory contingency reserve. The amount of net risk for
insurance in force at March 31, 2002 and December 31, 2001, as presented below,
was computed by applying the various percentage settlement options and
applicable stop-loss parameters to the insurance in force amounts based on the
original insured amount of the loan. Triad's ratio is as follows:


                                       March 31,       December 31,
                                          2002             2001

(Dollars in thousands)
Net risk............................  $ 4,671,413       $ 4,471,705
                                      ===========       ===========
Statutory capital and surplus.......  $   104,255       $   105,306
Statutory contingency reserve.......      205,653           193,747
                                      -----------       -----------
Total...............................  $   309,908       $   299,053
                                      ===========       ===========
Risk-to-capital ratio...............    15.1-to-1         15.0-to-1
                                      ===========       ===========


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

     Net income as determined in accordance with statutory  accounting practices
was $13.4  million for the three months  ended March 31, 2002 and $55.4  million
for the year ended December 31, 2001.

                                       7
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2002
                                   (Unaudited)


     At March 31, 2002 and December 31, 2001,  the amount of Triad's equity that
could be paid out in  dividends  to  stockholders  was $20.5  million  and $21.6
million,  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
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.  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-month
periods ended March 31, 2002 and 2001,  the Company's  comprehensive  income was
$9.2 million and $11.7 million, respectively.







                                       8
<PAGE>

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


RESULTS OF OPERATIONS

     Net  income for the first  quarter  of 2002 was $10.0  million or $0.71 per
diluted  share,  down from $10.9 million or $0.79 per diluted share in the first
quarter of 2001.  Net income for the first  quarter of 2001 included the receipt
of a nonrecurring  incentive payment of approximately  $1.9 million or $0.09 per
diluted share  relating to the  cancellation  of one of the Company's  excess of
loss  reinsurance  contracts.  Earnings per share for the first  quarter of 2002
includes $0.07 per share of net realized investment losses compared to $0.02 per
share of net realized investment gains in the first quarter of 2001.

     Operating  earnings  for the first three months of 2002  increased  3.6% to
$11.0 million from $10.6  million for the first three months of 2001.  Operating
earnings exclude realized investment losses of $1.5 million in the first quarter
of 2002 and realized  investment gains of $452,000 in the first quarter of 2001.
Operating  earnings per share on a diluted  basis were $0.78 for the first three
months of 2002  compared to $0.77 per share for the first three  months of 2001.
Excluding the effects of the nonrecurring  incentive  payment from first quarter
2001,  operating earnings increased 17% and operating earnings per diluted share
for the first  quarter of 2002  increased  14% compared to the first  quarter of
2001. The improvement in operating earnings is attributable primarily to a 24.7%
increase in earned premiums and an 8.3% increase in net investment income.

     Insurance  written was $2.8  billion for the first three  months of 2002 as
compared to $2.7 billion for the first three months of 2001, an increase of less
than 1%.  Traditional  flow  production  for the first quarter of 2002 increased
95.6% to $2.8  billion  from $1.4  billion  in the first  quarter  of 2001.  The
increase in new insurance written from traditional flow production was primarily
the result of expanding  relationships with national lenders,  strong demand for
risk-sharing arrangements,  and a lower interest rate environment.  There was no
insurance  written in the first quarter of 2002  attributable to structured bulk
transactions  while insurance written in the first quarter of 2001 included $1.3
billion of structured bulk transaction volume.

     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 loss of
one or more of these  significant  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  increased  to 3.6% for the
first three months of 2002  compared to 2.8% for the first three months of 2001.
Market  share for the first three months of 2001  excludes  $1.0 billion in bulk
production  in the  first  quarter  of 2001  that did not  meet  the  industry's
definition of new insurance written.  Net new primary insurance written excludes
insurance  placed  upon  loans  more  than 12  months  after  loan  origination,


                                       9
<PAGE>

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


insurance placed upon loans already covered by primary mortgage  insurance,  and
insurance  placed upon loans where lender exposure is effectively  reduced below
defined minimums.  This treatment is consistent with the new definitions adopted
by the  Company  and the  industry in the third  quarter of 2001  regarding  the
computation  of new insurance  written for market share  purposes.  Total direct
insurance in force reached  $22.1  billion at March 31, 2002,  compared to $16.9
billion at March 31, 2001, an increase of 30.7%.

     Total direct premiums written were $27.8 million for the first three months
of 2002,  an increase of 27.7% from $21.8  million for the first three months of
2001.  Net premiums  written  increased  by 23.6% to $24.5  million in the first
quarter of 2002 from $19.8 million for the same period of 2001.  Earned premiums
increased  24.7% to $24.5  million for the first three months of 2002 from $19.7
million  for the first three  months of 2001.  This growth in written and earned
premiums  resulted  from strong levels of new  insurance  written  offset by the
impact  of a  declining  persistency  rate  due  to a  high  level  of  mortgage
refinancings.

     Growth in direct  premiums  written was offset  somewhat by the increase in
ceded premiums written. Driven by increases in risk-sharing arrangements,  ceded
premium  written  increased  68.9% to $3.3 million for the first three months of
2002 from $2.0 million for the first three months of 2001. The Company's premium
cede rate (the ratio of ceded premiums  written to direct premiums  written) was
12.0% in the first  quarter of 2002 compared to 9.1% in the same period of 2001.
Approximately  49% of flow insurance written during the first quarter of 2002 is
subject to risk-sharing  arrangements  compared to 52% of insurance written (27%
including  bulk   transactions)  in  the  first  quarter  of  2001.   Management
anticipates ceded premiums will continue to increase as a result of the expected
increase in risk-sharing programs.

     Refinance activity was 48.6% of flow insurance written in the first quarter
of  2002  compared  to  33.6%  of  insurance   written  (22.7%   including  bulk
transactions)  in the  first  quarter  of 2001.  Persistency,  or the  amount of
insurance in force remaining from one-year  prior,  was 60.9% at March 31, 2002,
compared  to 67.6% at  December  31,  2001,  and  81.4% at March 31,  2001.  The
increase in refinance  activity and the decrease in persistency  were reflective
of the low interest rate environment.

     Net investment  income for the first three months of 2002 was $3.8 million,
an 8.3%  increase  over $3.5  million in the first  three  months of 2001.  This
increase in investment  income is the result of growth in the average book value
of invested  assets by $46.7 million to $281.0  million at March 31, 2002,  from
$234.3 million at March 31, 2001. The growth in invested  assets is attributable
to normal  operating  cash flow.  The pre-tax yield on average  invested  assets
decreased  to 5.4% for the first three  months of 2002,  as compared to 5.9% for
the first  three  months of 2001,  reflecting  the  current  low  interest  rate
environment  and the  disposal  of a number of higher  yielding,  lower  quality
securities  during the past twelve months to enhance the overall  quality of the
portfolio.  The  Company  has  been  investing  new  money in  shorter  duration
securities,  which are  currently  producing  lower yields than longer  duration
securities.  This strategy is based on the expectation  that interest rates will

                                       10
<PAGE>

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


rise in the future,  so that the maturing  shorter  duration  investments can be
reinvested in a higher interest rate environment. The portfolio's tax-equivalent
yield was 7.8% for the first  quarter of 2002 versus 8.1% for the first  quarter
of 2001. Based on fair value,  approximately  75% and 69% of the Company's fixed
maturity  portfolio  at March 31, 2002 and 2001,  respectively,  was composed of
state and municipal tax-preferred  securities.  At March 31, 2002, based on fair
value,  approximately 94% of the Company's fixed maturity portfolio was either a
U.S.  government or U.S. agency  obligation or was rated  investment grade by at
least one  nationally  recognized  securities  rating  organization  compared to
approximately  91% of the Company's fixed maturity  portfolio at March 31, 2001.
Realized losses in 2002 included a $755,000 impairment  writedown on a bond held
in the Company's portfolio

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased  by 14.2% in the  first  quarter  of 2002 to $2.5  million  from  $2.2
million  for the same  period of 2001.  This rise  reflects  an increase in paid
losses and delinquent  loans as the Company's  insurance in force  matures.  The
Company's loss ratio (the ratio of incurred losses to earned premiums) was 10.3%
for the first quarter of 2002 as compared to 11.2% for the first quarter of 2001
and 10.7% for all of 2001.

     As of March 31, 2002, approximately 77% of the Company's insurance in force
was  originated  in the last 36  months.  Management  believes,  based  upon its
experience  and industry  data,  that claims  incidence for it and other private
mortgage  insurers is generally  highest in the third  through sixth years after
loan  origination.  Although  the  claims  experience  on  insurance  written in
previous years has been quite  favorable,  management  does not expect losses to
remain at the low levels  currently  reported.  The Company expects its incurred
losses to increase as a greater  amount of its  insurance  in force  reaches its
anticipated highest claim frequency years. 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 impossible to predict with any degree
of certainty the impact of such higher claim frequencies on future earnings.

     Amortization  of deferred  policy  acquisition  costs increased by 27.9% to
$3.0  million in the first three  months of 2002 from $2.3 million for the first
three months of 2001. 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 quarter of 2002.

     Other  operating  expenses  increased  39.5% to $6.1  million for the first
quarter of 2002 from $4.4 million for the same period in 2001.  This increase in
expenses is primarily attributable to personnel,  technology  amortization,  and
equipment  costs  required  to  support  the  Company's   increased   levels  of
production, product development,  system enhancements, and geographic expansion.
The expense ratio (ratio of underwriting  expenses to net premiums  written) for
the first  quarter of 2002 was 37.0%  compared to 33.7% for the first quarter of
2001 and 35.1% for all of 2001.

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


     The  effective  tax rate for the  first  three  months of 2002 was 31.1% as
compared to 31.3% for the first  three  months of 2001.  Management  expects the
Company's effective tax rate to remain about the same as long as yields from new
funds invested in tax-preferred securities remain favorable in relation to fully
taxable securities.

LIQUIDITY AND CAPITAL RESOURCES

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

     The Company generated positive cash flow from operating  activities for the
first  quarter of 2002 of $5.2  million  compared to $11.3  million for the same
period of 2001.  Triad's  positive  operating  cash flow in the first quarter of
2002 reflects  premiums and  investment  income  received that were greater than
expenses  and  losses  paid.  The  decrease  in  operating  cash  flow  from the
prior-year level reflects increases in paid expenses and losses exceeding growth
in collected premiums and the $1.9 million cash payment in the prior-year period
from cancellation of an excess of the loss reinsurance contract.

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

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

     Consolidated  invested  assets  were  $286.4  million  at March  31,  2002,
compared to $277.2 million at December 31, 2001.  Fixed maturity  securities and
equity  securities  classified as  available-for-sale  totaled $268.2 million at
March 31,  2002.  Net  unrealized  investment  gains were $1.0 million on equity
securities and net unrealized  investment losses were $804,000 on fixed maturity
securities at March 31, 2002. Based on fair value, the fixed maturity  portfolio
consisted of approximately 75% municipal  securities,  20% corporate securities,
and 5% U.S. government obligations at March 31, 2002.

                                       12
<PAGE>

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


     The Company's loss reserves were $18.2 million at March 31, 2002,  compared
to $18.0  million at December 31, 2001.  Reserves are  established  for reported
insurance  losses and loss adjustment  expenses based on when notices of default
on insured  mortgage  loans are  received.  Reserves  are also  established  for
estimated  losses incurred on notices of default not yet reported by the lender.
Consistent with industry practices, the Company does not establish loss reserves
for future  claims on insured  loans which are not  currently  in  default.  The
growth in loss  reserves is the result of the increase in reported  defaults and
the maturing of the Company's risk in force.  The Company  expects loss reserves
will  continue  to grow,  reflecting  the growth and aging of its  insurance  in
force.  Including  bulk loans,  the Company's  delinquency  ratio,  the ratio of
delinquent  insured loans to total insured  loans,  was 0.91% at March 31, 2002,
compared to 0.89% at December 31, 2001.

     Reserves  are  established  by  management   using  estimated  claim  rates
(frequency)  and claim  amounts  (severity)  to estimate  ultimate  losses.  The
reserving process  incorporates a  multi-dimensional  analytical form that gives
effect to current economic conditions and profiles delinquencies by such factors
as policy year, geography,  and chronic late payment characteristics in addition
to profiling them by age. 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 estimation process.  These sensitivity  analyses allow management to use
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.

     Total  stockholders'  equity increased to $263.7 million at March 31, 2002,
from $246.1 million at December 31, 2001. This increase resulted  primarily from
net income of $10.0  million for the first  quarter of 2002 and from  additional
paid-in  capital of $8.4 million  resulting  from the exercise of employee stock
options  and the  related  tax  benefit,  offset  somewhat  by a decline  in net
unrealized gains on invested assets classified as available-for-sale of $837,000
(net of income tax).

     Triad's total statutory  policyholders' surplus decreased to $104.3 million
at March 31, 2002, from $105.3 million at December 31, 2001.  Triad's  statutory
earned  surplus  decreased to $20.5 million at March 31, 2002 from $21.6 million
at December 31, 2001. The decrease in Triad's statutory  policyholders'  surplus
and  statutory  earned  surplus  resulted  from the  increase  in the  statutory
contingency  reserve and the timing of the  purchase of United  States  Mortgage
Guaranty Tax and Loss Bonds which  offset the increase in statutory  net income.
The balance in the statutory contingency reserve was $205.7 million at March 31,
2002, compared to $193.7 million at December 31, 2001.

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


     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
financial  strength  ratings and the adequacy of its capital in relation to risk
in force. A significant  reduction of capital or a significant  increase in risk
may impair Triad's  ability to write  additional  insurance.  A number of states
also generally limit Triad's  risk-to-capital  ratio to 25-to-1. As of March 31,
2002, Triad's  risk-to-capital ratio was 15.1-to-1,  as compared to 15.0-to-1 at
December 31,  2001,  and  11.2-to-1  for the industry as a whole at December 31,
2000, the latest industry data available.

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

     In July 2001, the Office of Federal Housing  Enterprise  Oversight  (OFHEO)
released its initial  risk-based  capital  rules for Fannie Mae and Freddie Mac.
The regulation provided a more preferential  capital credit for insurance from a
"AAA"  rated  private  mortgage  insurer  than for  insurance  from a "AA" rated
private mortgage insurer.  In December 2001, OFHEO announced  proposed revisions
to the  risk-based  capital  rules for Fannie  Mae and  Freddie  Mac.  Among the
proposed  revisions,  the new rule reduced,  but did not eliminate,  the capital
charge  differential  between  insurance  from a "AAA"  rated  private  mortgage
insurer and insurance from a "AA" rated private mortgage  insurer.  In addition,
the proposed phase-in period was extended from five years to ten years. The rule
was finalized in February 2002 and became effective in March 2002. The continued
presence of a capital charge differential could adversely affect Triad. Triad is
evaluating  various  business  approaches  and options  available to address the
capital differential  contained in the rule. What response,  if any, Triad makes
and the ultimate impact of the regulation on Triad is unknown at this time.

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

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

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


consolidation  occurring among mortgage lenders and the Company's  concentration
of insurance in force generated through  relationships  with significant  lender
customers,  the loss of a  significant  customer  may have an adverse  effect on
earnings;   the  Company's  performance  may  be  impacted  by  changes  in  the
performance of the financial markets and general economic  conditions.  Economic
downturns  in  regions  where  Triad's  risk is more  concentrated  could have a
particularly adverse effect on Triad's financial condition and loss development.

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

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











                                       15

<PAGE>

PART II

ITEM 1.  LEGAL PROCEEDINGS - None

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES - None

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

ITEM 5.  OTHER INFORMATION - None

ITEM 6.  A. EXHIBITS AND REPORTS ON FORM 8-K - None




                                   SIGNATURES

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

                                                 TRIAD GUARANTY INC.


Date: May 15, 2002
                                                 /s/ Michael E. Crow
                                                 ---------------------
                                                 Michael E. Crow
                                                 Vice President and Controller,
                                                 Principal Accounting Officer





                                       16