##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
 (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended December 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934For 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 or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)101 South Stratford Road,
    Winston-Salem, North Carolina(Address of principal
    executive offices)

27104(Zip Code)   Registrants telephone number, including area code:
 (336) 723-1282
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, par value $0.01 per share
 (Title of class)
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated filer o

Accelerated filer o

Non-accelerated filero(Do not check if a smaller reporting company)

Smaller reporting company þ   Rule 12b-2 o þ
  Rule 13d-3
    Portions of the following document are incorporated

Part of this Form 10-K into which the portions of theby reference into this Form 10-K:

document are incorporated by referenceTriad Guaranty Inc.

Part IIIProxy Statement for 2010 Annual Meeting of Stockholders




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##### 





TABLE OF
    CONTENTS
   
 PagePart IItem 1.


Business


1Item 1A.


Risk Factors


16Item 1B.


Unresolved Staff Comments


24Item 2.


Properties


24Item 3.


Legal Proceedings


24Item 4.


(Removed and Reserved)


25Part IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


26Item 6.


Selected Financial Data


27Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


27Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


53Item 8.


Financial Statements and Supplementary Data


53Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


53Item 9A(T).


Controls and Procedures


53Item 9B.


Other Information


55Part IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


55Item 11.


Executive Compensation


55Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


55Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


55Item 14.


Principal Accounting Fees and Services


55Part IVItem 15.


Exhibits, Financial Statement Schedules


56Signatures


57Index to Consolidated Financial Statements and
    Financial Statement Schedules


59Exhibit Index


99EX-10.60EX-10.61EX-21EX-23.1EX-31.1EX-32.1




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##### Table of Contents



PART I  Item 1.
    Business  Overview
    of Triad
      Form 10-K
    and/or
   1




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##### Table of Contents



Form 10-K.
  Form 10-K
  (336) 723-1282.
  Accounting
    Principles
    Form 10-K
  other-than-temporary
 2




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##### Table of Contents



Corrective
    Orders
    
    Required Triad to submit a corrective plan to the Department;
    Prohibits all stockholder dividends from Triad to TGI without
    the prior approval of the Department;
    Prohibits interest and principal payments on Triads
    surplus note to TGI without the prior approval of the Department;
    Restricts Triad from making any payments or entering into any
    transaction that involves the transfer of assets to, or
    liabilities from, any affiliated parties without the prior
    approval of the Department;
    Requires Triad to obtain prior written approval from the
    Department before entering into certain transactions with
    unaffiliated parties;
    Requires Triad to meet with the Department in person or via
    teleconference as necessary; and
    Requires Triad to furnish to the Department certain reports,
    agreements, actuarial opinions and information on an ongoing
    basis at specified times.      
    Effective June 1, 2009, all valid claims under Triads
    mortgage guaranty insurance policies are settled 60% in cash and
    40% by recording a DPO;
    At March 31, 2009, Triad was required to adjust surplus and
    reserves reflecting the impact of the second Corrective Order on
    future settled claims;
    The DPO requires that we accrue a carrying charge based on the
    investment yield earned by Triads investment portfolio;
    Triad will establish an escrow account at least equal to the DPO
    balance and any associated carrying charges;
    Triad will require that any risk or obligation of any captive
    reinsurer must be paid in full, and will deposit any excess
    reinsurance recovery above the 60% cash payment into an escrow
    account;
    Payment of the DPO and the carrying charge is subject to
    Triads future financial performance and requires the
    approval of the Department;
    Procedures to account for the impact of the second Corrective
    Order in the financial statements prepared in accordance with
    SAP; 3




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
    Upon payment of a claim under these provisions, Triad is deemed
    to have fully satisfied its obligations under the respective
    insurance policy;
    Other restrictions and requirements affecting the payment and
    transferability of the DPOs and associated carrying
    charge; and
    Certain reporting requirements.      Going
    Concern
      Overview
    of Market Conditions
     4




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loan-to-value
      Government
    Initiatives
         5




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Form 10-K,
  Mortgage
    Insurance Products
    Primary
    Insurance
  loan-to-value loan-by-loan
    Modified
    Pool Insurance
      Sales
   6




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Cancellation
    of Insurance
      and/or
        Reinsurance
   7




---



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excess-of-loss excess-of-loss
             8




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Contract
    Underwriting
    Defaults
    and Claims
  Defaults
           9




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Claims
    
    government and private industry efforts to prevent foreclosures
    through loan modification programs and other initiatives;
    delays in submitting and processing claims by the servicers of
    the defaulted loans due to substantial volume increases in
    defaults; and
    our ongoing effort to identify fraud, misrepresentation or other
    underwriting violations on loans that are currently in default.    deed-in-lieu
   10




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Rescission
    and Denial Activity
              Loss
    Mitigation
  deeds-in-lieu
  state-by-state.
 11




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##### Table of Contents



Loss
    Reserves
    Gross
    Risk in Force
    Geographic
    Dispersion
    December 31,2009


2008Gross Risk


Rate of


Gross Risk


Rate ofState

in Force %


Default


in Force %


DefaultCalifornia


13.3
%


35.7
%


14.6
%


23.3
%Florida


11.5
%


39.3
%


11.6
%


25.9
%Texas


6.8
%


9.4
%


6.5
%


5.3
%Arizona


4.6
%


30.9
%


5.2
%


17.6
%Illinois


4.1
%


23.1
%


3.9
%


11.1
%North Carolina


3.9
%


12.3
%


3.8
%


5.6
%Georgia


3.7
%


17.2
%


3.5
%


8.5
%New Jersey


3.4
%


23.9
%


3.1
%


11.7
%Virginia


3.3
%


14.8
%


3.3
%


9.5
%Colorado


3.1
%


13.8
%


3.2
%


6.6
%New York


3.0
%


18.0
%


2.7
%


9.0
%Washington


2.8
%


16.3
%


2.8
%


6.7
%Nevada


2.7
%


40.0
%


3.0
%


21.5
%Pennsylvania


2.6
%


12.2
%


2.5
%


6.7
%Maryland


2.5
%


21.6
%


2.4
%


11.2
%All Other


28.5
%


14.5
%


27.9
%


8.0
%Total Company


100.0
%


20.1
%


100.0
%


11.7
%  12




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Regulation
      other-than-temporary other-than-temporary
     13




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risk-to-capital risk-to-capital. risk-to-capital
  Form 10-K,
    Available
    Information
  www.triadguaranty.com Form 10-K. Form 10-K, Form 10-Q, Form 8-K, www.triadguaranty.com www.sec.gov (800) 732-0330.
  Employees
   14




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Executive
    Officers of the Registrant and its Primary
    Subsidiaries
    Name

Position

AgeKenneth W. Jones

President, Chief Executive Officer, Principal Financial Officer
    of TGI and Triad and Director of Triad


52Kenneth S. Dwyer

Vice President and Chief Accounting Officer of TGI and Triad


59Shirley A. Gaddy

Senior Vice President, Operations of Triad


57Steven J. Haferman

Senior Vice President, Strategic Initiatives of Triad and
    Director of Triad


48Earl F. Wall

Senior Vice President, Secretary, and General Counsel of TGI and
    Triad and Director of Triad


52   Kenneth W. Jones
  Kenneth S. Dwyer Pan-American Pan-American
  Shirley A. Gaddy
  Stephen J. Haferman
  Earl F. Wall
    15




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Item 1A.
    Risk
    Factors  Form 10-K.
  We reported a deficit in assets under GAAP at
    December 31, 2009 of $706 million. In order to
    overcome this deficit in assets, our future net income on the
    remaining insurance in force must exceed $706 million
    during the run-off period. There is substantial risk that the
    future net income during the run-off period will not exceed this
    amount, which could result in the institution of receivership
    proceedings for Triad and subsequently could lead us to
    institute a proceeding seeking relief from creditors under
    U.S. bankruptcy laws.
        If we are unable to satisfy TGIs future debt service
    obligations, TGI would likely be forced to seek bankruptcy
    protection, which would have a material adverse effect on our
    financial condition, results of operations, and cash flows, and
    would effectively eliminate all remaining stockholder value.
   16




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other-than-temporary other-than-temporary
      Triad is operating under two Corrective Orders issued by the
    Department. Failure to comply with the provisions of the
    Corrective Orders may result in the imposition of fines or
    penalties or subject Triad to further legal proceedings.
      The adverse conditions in the housing and mortgage markets
    and the high level of unemployment continue to have a negative
    impact on the development of the loans we insure. Although we
    regularly review and consider our methodology for recording our
    loss reserve estimates, these estimates are subject to
    uncertainties and are based on assumptions that we are required
    to make during this time of substantial economic uncertainty. As
    a result, settled claims may ultimately be substantially
    different than the loss reserves that we have recorded and such
    differences may have a material adverse impact on our financial
    condition and results of operations.
     17




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There is substantial doubt about our ability to continue as a
    going concern.
   18




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During the fourth quarter of 2009, we sold our information
    technology and operating platform to Essent Guaranty, Inc.
    (Essent), a new mortgage insurer, for up to
    $30 million in cash and the assumption by Essent of certain
    contractual obligations. Furthermore, a number of our former
    information technology and operations employees have joined
    Essent. Under a services agreement, Essent is to provide us with
    ongoing information technology services, customer service and
    policy administration support. This transaction provides for
    potential additional risk including: (1) the future
    collection of both the fixed and contingent payments; and
    (2) the outsourcing of services vital to an efficient
    run-off.
      Our financial condition at December 31, 2009 has
    benefited substantially from significant rescission activity and
    denial of claims. If we do not continue to realize benefits from
    rescissions and denials at similar levels, or our ability to
    rescind or deny coverage were successfully challenged in
    litigation, then our financial condition and results of
    operations could be materially and adversely affected.
         19




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Our operating cash flow consists of net premium received plus
    investment income less losses and expenses paid. In 2009, we
    experienced a deficit in operating cash flow of
    $135 million. We have repositioned our investment portfolio
    in an attempt to match anticipated maturities with our expected
    cash flow needs. If the proceeds from maturities of securities
    coupled with other sources are insufficient to cover operating
    cash flow deficits, we could be forced to liquidate securities
    which, depending on market conditions, may result in
    unanticipated realized investment losses.
    Consistent with industry practice, we provide reserves only
    for loans in default rather than on our estimate of the ultimate
    loss for all insured loans. As such, our results of operations
    in certain periods could be disproportionately affected by the
    timing of reported defaults.
    Since 2007, the United States housing market has experienced
    a significant amount of home price depreciation which has had a
    direct negative impact on our results of operations and
    financial condition. During 2009, home prices continued to
    decline in the first half of the year, and while the decline
    moderated in the second half of the year, home prices generally
    remained depressed in most markets. If home prices continue to
    decline on a more significant or expanded geographic basis than
    what we have experienced to date, we may incur a higher level of
    losses from paid claims and also be required to increase our
    loss reserves on those defaults reported to us at
    December 31, 2009.
   20




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Because a significant portion of our business is sensitive to
    interest rates, a large increase in rates would cause higher
    monthly mortgage payments for certain borrowers that could
    potentially lead to a greater number of defaults, which would
    adversely impact our business.
      Geographic concentration of our risk in force in certain
    distressed markets has resulted in increased defaults and higher
    risk in default from the significantly larger balances on
    mortgage loans in these states. Ongoing house price depreciation
    in these distressed markets could lead to further increases in
    reserves and paid claims, which could further negatively impact
    our financial performance.
    A large portion of our insurance in force consists of loans
    with high
    loan-to-value
    ratios, which could result in a greater number of defaults and
    larger claims than loans with lower
    loan-to-value
    ratios during and following periods of declining home prices.
   21




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Because we generally cannot cancel mortgage insurance
    policies or adjust renewal premiums due to changing economic
    conditions, unanticipated defaults and claims could cause our
    financial performance to suffer significantly.
    Our loss experience may increase as our policies continue to
    age.
    If we failed to properly underwrite mortgage loans when we
    provided contract underwriting services, we may be required to
    provide monetary and other remedies to the customer.
    If our lender partners for which we have entered into captive
    reinsurance arrangements cannot or choose not to fulfill their
    financial obligations, our benefits under the captive
    reinsurance treaties will be limited to the trust balances
    maintained within the reinsurance structures, which could have
    an adverse impact on our future results of operations.
   22




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Loan servicers have experienced a significant increase in
    their workload due to the rapid growth in defaults and
    foreclosures. If the loan servicer fails to act proactively with
    delinquent borrowers in an effort to avoid foreclosure, then the
    number of delinquent loans eventually resulting in a paid claim
    could increase.
    Triad is operating in run-off under Corrective Orders from
    the Department and the outlook for the legacy mortgage insurance
    industry remains uncertain. Maintaining experienced staff is
    critical to achieving a successful run-off.
    Loan modification and other similar programs may not provide
    material benefits to us.
       23




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We delisted our common stock from The NASDAQ Global Select
    Market (NASDAQ) on December 28, 2009 and our
    common stock is currently traded on the OTC Bulletin Board
    (OTCBB) and the Pink
    Sheets®

    Electronic OTC Market (Pink Sheets). Our move from
    NASDAQ to the OTCBB and Pink Sheets could result in reduced
    liquidity for our stockholders or otherwise make it more
    difficult for them to execute transactions in our common
    stock.
    year-to-date
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties      Item 3.
    Legal
    Proceedings     24




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##### Table of Contents



Item 4.
    (Removed
    and Reserved). 25




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    information
  ®
  2009


2008High


Low


High


LowFirst Quarter

$
0.85


$
0.12


$
10.19


$
4.10Second Quarter

$
1.40


$
0.16


$
5.43


$
0.73Third Quarter

$
1.82


$
0.58


$
4.49


$
0.35Fourth Quarter

$
1.36


$
0.25


$
2.00


$
0.28   ® ®
  Holders
    Dividends
    Issuer
    purchases of equity securities and unregistered sales of equity
    securities
   26




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Form 10-K
  Overview
  Form 10-K Form 10-K, and/or
 27




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##### Table of Contents



loan-to-value loan-by-loan
    
    earned renewal premiums from the remaining insurance in force,
    net of:  
    reinsurance premiums ceded, primarily for captive
    reinsurance, and
    refunds paid or accrued resulting from the cancellation of
    insurance in force or for coverage rescinded or anticipated to
    be rescinded due to violations of certain provisions of a master
    policy;  
    investment income; and
    proceeds from the sale of assets other than the sale of
    securities.      
    settled claims net of any losses ceded to captive reinsurers;
    changes in reserves for estimated future claim payments on loans
    that are currently in default net of any reserves ceded to
    captive reinsurers;
    general and administrative costs of servicing existing policies;
    other general business expenses; and
    interest expense.    
    the conditions of the housing, mortgage and capital markets that
    have a direct impact on default rates, mitigation efforts, cure
    rates and ultimately the amount of claims settled;
    the overall general state of the economy and job market;
    persistency levels on our remaining insurance in force; 28




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
    operating efficiencies; and
    the level of investment yield, including realized gains and
    losses, on our investment portfolio.      Corrective
    Orders
    
    Required Triad to submit a corrective plan to the Department;
    Prohibits all stockholder dividends from Triad to TGI without
    the prior approval of the Department;
    Prohibits interest and principal payments on Triads
    surplus note to TGI without the prior approval of the Department;
    Restricts Triad from making any payments or entering into any
    transaction that involves the transfer of assets to, or
    liabilities from, any affiliated parties without the prior
    approval of the Department;
    Requires Triad to obtain prior written approval from the
    Department before entering into certain transactions with
    unaffiliated parties;
    Requires Triad to meet with the Department in person or via
    teleconference as necessary; and
    Requires Triad to furnish to the Department certain reports,
    agreements, actuarial opinions and information on an ongoing
    basis at specified times.      
    Effective June 1, 2009, all valid claims under Triads
    mortgage guaranty insurance policies are settled 60% in cash and
    40% by recording a DPO; 29




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
    At March 31, 2009, Triad was required to adjust surplus and
    reserves reflecting the impact of the second Corrective Order on
    future settled claims;
    The DPO requires that we accrue a carrying charge based on the
    investment yield earned by Triads investment portfolio;
    Triad will establish an escrow account at least equal to the DPO
    balance and any associated carrying charges;
    Triad will require that any risk or obligation of any captive
    reinsurer must be paid in full, and will deposit any excess
    reinsurance recovery above the 60% cash payment into an escrow
    account;
    Payment of the DPO and the carrying charge is subject to
    Triads future financial performance and requires the
    approval of the Department;
    Procedures to account for the impact of the second Corrective
    Order in the financial statements prepared in accordance with
    SAP;
    Upon payment of a claim under these provisions, Triad is deemed
    to have fully satisfied its obligations under the respective
    insurance policy;
    Other restrictions and requirements affecting the payment and
    transferability of the DPOs and associated carrying
    charge; and
    Certain reporting requirements.        Recent
    Events Affecting our Business
     30




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31




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##### Table of Contents



over-the-counter ® ® over-the-counter
    Consolidated
    Results of Operations
    Year EndedDecember 31,2009


2008


% Change(Dollars in thousands, except per share data)Earned premiums

$
179,658


$
257,423



(30
)Net losses and loss adjustment expenses


807,627



923,301



(13
)Net loss


(595,632
)


(631,127
)


(6
)Diluted loss per share

$
(39.70
)

$
(42.27
)


(6
)  32




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
    Loans on properties in California, Florida, Arizona, and Nevada
    (collectively referred to as distressed
    markets)  At December 31, 2009, the
    default rate for the distressed markets was 36.8% compared to
    14.9% for the remaining portfolio and the risk in default in the
    distressed markets comprised 52.5% of the gross risk in default
    while only comprising 32.2% of total risk in force. We believe
    the adverse performance of the distressed markets was, in part,
    due to non-sustainable levels of house price appreciation in the
    years prior to 2007 and the subsequent unprecedented
    depreciation in house prices that has continued. In general, the
    non-distressed markets have not experienced the significant
    collapse in house prices that have occurred in the distressed
    markets. During 2009, however, risk in default in the
    non-distressed markets grew 59.6% compared to a growth rate of
    16.0% in the distressed markets. We believe the growing
    deterioration in the non-distressed markets is a result of high
    unemployment, although the general depressed conditions in house
    prices and credit markets have also had an adverse impact.
    Defaults in the distressed markets also comprised a large
    percentage of paid claims and rescinded policies which mitigated
    the growth rate in risk in default in these markets.
    Policies originated in 2006 and 2007  At
    December 31, 2009, the default rate for these policy years
    was 27.1% and 26.6%, respectively, compared to 14.4% for the
    other policy years combined. Defaults in these policy years
    comprised 70.2% of our gross risk in default while only
    comprising 55.7% of our total risk in force. All policy years,
    however, experienced a large increase in default rates in 2009.    Production
   33




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##### Table of Contents



Insurance
    and Risk in Force
    December 31,2009


2008


% Change(Dollars in millions)Primary insurance:Flow primary insurance

$
32,856


$
39,370



(17
)Structured bulk insurance


3,064



3,902



(21
)Total Primary insurance


35,920



43,272



(17
)Modified Pool insurance


14,584



19,312



(24
)Total insurance

$
50,504


$
62,584



(19
)       debt-to-income
     34




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##### Table of Contents



mark-to-market mark-to-market
      December 31, 2009


December 31, 2008Primary


Modified Pool


Primary


Modified PoolGross





Gross





Gross





GrossRisk in





Risk in





Risk in





Risk inForce*


Percent


Force*


Percent


Force*


Percent


Force*


Percent(Dollars in millions)2004 and before

$
2,018.3



21.4
%

$
712.8



16.9
%

$
2,435.7



21.6
%

$
801.1



14.2
%2005


1,207.3



12.9



1,494.6



35.5



1,405.6



12.5



1,899.0



33.82006


1,907.2



20.4



1,336.7



31.8



2,386.0



21.2



2,111.6



37.72007


3,649.2



39.0



664.8



15.8



4,376.5



38.9



802.6



14.32008


586.8



6.3











654.7



5.8







Total

$
9,368.7



100.0
%

$
4,208.8



100.0
%

$
11,258.5



100.0
%

$
5,614.3



100.0
%     *
    
    Gross risk in force is on a per policy basis and does not
    account for risk ceded to captive reinsurers or applicable
    stop-loss amounts and deductibles on Modified Pool structured
    bulk transactions.       35




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##### Table of Contents



Revenues
    Year Ended December 31,2009


2008


% Change(Dollars in thousands)Direct premium written before the impact of refunds

$
293,485


$
343,668



(15
)Less:Cash refunds primarily related to rescissions


(46,070
)


(11,436
)


303Change in refund accruals primarily related to rescissions


(30,403
)


(15,922
)


91Direct premium written


217,012



316,310Ceded premium written


(40,872
)


(60,777
)


(33
)Net premium written


176,140



255,533



(31
)Change in unearned premiums


3,518



1,890



86Earned premiums

$
179,658


$
257,423



(30
)Net investment income

$
44,133


$
39,580



12Net realized investment (losses) gains

$
1,354


$
(26,559
)


(105
)Other income

$
12,666


$
8



158,225Total revenues

$
237,811


$
270,452



(12
)         other-than-temporarily Investments  Debt and Equity Securities
 36




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##### Table of Contents



Losses
    and Expenses
  year-to-year
  Year Ended December 31,2009


2008


% Change(Dollars in thousands)Net losses and loss adjustment expenses:Net settled claims

$
515,413


$
237,080



117Net change in loss reserves


272,553



665,549



(59
)Loss adjustment expenses


19,661



20,672



(5
)Total

$
807,627


$
923,301



(13
)Policy acquisition costs

$



$
39,416



(100
)Other operating expenses (net of acquisition costs deferred)

$
35,911


$
58,709



(39
)Loss ratio


449.5
%


358.7
%


25Expense ratio


20.4
%


24.8
%


(18
)Combined ratio


469.9
%


383.5
%


23       Year Ended December 31,2009


2008


% Change(Dollars in thousands)Net settled claims:Primary insurance

$
360,613


$
190,836



89Modified Pool insurance


214,837



46,742



360Total direct settled claims


575,450



237,578



142Ceded Paid Losses


(60,037
)


(498
)


11,958Total net settled claims

$
515,413


$
237,080



117Number of claims settled:Primary insurance


6,117



3,662



67Modified Pool insurance


3,175



758



319Total


9,292



4,420



110    37




---



##### Table of Contents



December 31, 2009


December 31, 2008Primary


Modified Pool


Primary


Modified PoolAverage


Average


Average


Average


Average


Average


Average


AverageVintage Year

Loan Size


Insured Risk


Loan Size


Insured Risk


Loan Size


Insured Risk


Loan Size


Insured Risk2004 and Prior

$
115,009


$
29,588


$
137,459


$
40,939


$
117,899


$
29,994


$
140,513


$
41,8052005


154,263



40,777



172,011



55,570



156,011



40,983



177,143



57,6792006


200,178



51,909



263,390



66,617



207,918



53,710



263,356



69,3102007


202,948



54,421



268,527



78,303



207,159



55,755



272,745



79,1942008


202,737



46,761











204,341



46,952







Overall Average

$
167,720


$
43,745


$
200,165


$
57,765


$
171,463


$
44,612


$
208,361


$
60,572     December 31, 2009


December 31, 2008Primary


Modified Pool


Primary


Modified PoolAverage


Average


Average


Average


Average


Average


Average


AverageLoan Size


Insured Risk


Loan Size


Insured Risk


Loan Size


Insured Risk


Loan Size


Insured RiskDistressed States:California

$
321,759


$
79,797


$
328,631


$
87,058


$
338,511


$
84,726


$
332,252


$
88,693Florida


196,021



51,909



203,540



55,475



202,670



53,737



211,933



58,047Arizona


191,560



49,974



197,569



60,096



199,468



52,504



204,922



63,292Nevada


219,335



58,382



219,730



68,718



243,600



65,888



227,631



72,041Average distressed states

$
229,695


$
59,308


$
253,891


$
69,887


$
242,075


$
62,856


$
260,512


$
72,499Average non-distressed states

$
153,181


$
40,095


$
166,741


$
50,223


$
154,678


$
40,275


$
172,285


$
52,321Overall Average

$
167,720


$
43,745


$
200,165


$
57,765


$
171,463


$
44,612


$
208,361


$
60,572        38




---



##### Table of Contents



and/or
    Quarter EndedDecember 31,


September 30,


June 30,


March 31,


December 31,


September 30,Book Year

2009


2009


2009


2009


2008


20082000 & Prior


1.02
%


1.01
%


1.00
%


0.99
%


0.99
%


0.98
%2001


1.50
%


1.46
%


1.44
%


1.42
%


1.42
%


1.38
%2002


2.13
%


2.08
%


2.01
%


1.94
%


1.92
%


1.87
%2003


2.17
%


2.04
%


1.86
%


1.70
%


1.66
%


1.59
%2004


4.37
%


3.97
%


3.50
%


2.86
%


2.52
%


2.21
%2005


10.93
%


10.51
%


8.85
%


6.71
%


5.30
%


4.45
%2006


15.10
%


16.41
%


15.19
%


10.46
%


9.39
%


7.83
%2007


14.82
%


13.42
%


12.05
%


7.72
%


6.46
%


5.66
%2008


4.29
%


3.66
%


2.83
%


1.83
%


1.30
%


0.60
%End of Period Cummulative Total:


7.25
%


7.10
%


6.39
%


4.63
%


4.03
%


3.49
%          39




---



##### Table of Contents



Year EndedDecember 31,


%2009


2008


Change(Dollars in thousands)Increase in reserve for losses and LAE on a gross basis before
    the benefit of captives and Modified Pool structures

$
698,468


$
875,959



(20
)Less:Ceded reserves to captive reinsurers


72,370



149,531



(52
)Impact of Modified Pool structures


349,265



48,059



627Net increase in reserve for losses and loss adjustment expenses

$
276,833


$
678,369



(59
)       December 31, 2009


December 31, 2008Gross Risk


Total


Remaining


Gross Risk


Total


RemainingVintage Year

in Force


Stop Loss


Stop Loss


in Force


Stop Loss


Stop Loss(Dollars in millions)2003 and Prior

$
224.5


$
176.4


$
157.6


$
253.9


$
181.7


$
170.72004


504.4



164.8



96.5



566.0



164.9



138.52005


1,461.8



260.4



11.5



1,863.1



261.0



132.92006


1,423.5



366.6



38.9



2,229.2



389.8



139.02007


717.0



109.0



5.9



869.1



117.6



39.3    40




---



##### Table of Contents



December 31,


December 31,2009


2008(Dollars in thousands)Primary insurance:Reserves for reported defaults

$
1,088,776


$
728,981Reserves for defaults incurred but not reported


44,454



65,671Total Primary insurance


1,133,230



794,652Modified Pool insurance:Reserves for reported defaults


340,504



344,112Reserves for defaults incurred but not reported


41,492



31,539Total Modified Pool insurance


381,996



375,651Reserve for loss adjustment expenses


21,817



17,537Total reserves for losses and loss adjustment expenses

$
1,537,043


$
1,187,840     December 31,


December 31,2009


2008% of Gross Risk In Force:California


13.3
%


14.6
%Florida


11.5
%


11.6
%Arizona


4.6
%


5.2
%Nevada


2.7
%


3.0
%Total Distressed Market States


32.1
%


34.4
%% of Gross Risk in Default:California


21.1
%


25.1
%Florida


20.2
%


23.1
%Arizona


6.5
%


7.2
%Nevada


4.8
%


5.0
%Total Distressed Market States


52.6
%


60.4
%% of Gross Reserves:California


20.8
%


24.4
%Florida


21.6
%


23.5
%Arizona


7.2
%


7.4
%Nevada


5.3
%


5.0
%Total Distressed Market States


54.9
%


60.3
%    41




---



##### Table of Contents



December 31,


December 31,2009


2008(Dollars in millions)Gross risk on loans in default

$
3,638


$
2,729Risk expected to be rescinded on loans in default


(725
)


(405
)Risk in default net of expected rescissions

$
2,913


$
2,324Gross case reserve

$
2,427


$
1,385Gross case reserves on loans expected to be rescinded


(540
)


(239
)Gross case reserves net of expected rescissions

$
1,887


$
1,146Gross case reserves net of expected rescissions as a percentage
    of gross risk in default(1)


51.9
%


42.0
%Gross case reserves net of expected rescissions as a percentage
    of gross risk in default, net of expected rescissions


64.6
%


49.3
%Percentage decrease in gross case reserves from rescission factor


22.2
%


17.3
%     (1)
    
    Reflects gross case reserves, which excludes IBNR, ceded
    reserves and the benefit from Modified Pool structures, as a
    percentage of risk in default for total delinquent loans.    December 31,


December 31,2009


2008Total business:Number of insured loans in force


287,026



345,055Number of loans in default


57,775



40,286Percentage of loans in default (default rate)


20.13
%


11.68
%Primary insurance:Number of insured loans in force


214,164



252,368Number of loans in default


38,023



24,241Percentage of loans in default


17.75
%


9.61
%Modified Pool insurance:Number of insured loans in force


72,862



92,687Number of loans in default


19,752



16,045Percentage of loans in default


27.11
%


17.31
%    42




---



##### Table of Contents



Expenses
    and Taxes
              Financial
    Position
      Investment
    Portfolio
     43




---



##### Table of Contents



December 31, 2009


December 31, 2008Amount


Percent


Amount


Percent(Dollars in thousands)Fixed maturity securities:U. S. government and agencies

$
25,260



3.1
%

$
7,996



0.9
%Foreign government and corporate debt


10,302



1.3
%


17,312



1.9
%Corporate debt


500,999



61.7
%


477,056



53.3
%Residential mortgage-backed


107,406



13.2
%


126,679



14.1
%Asset-backed


39,392



4.9
%


65,749



7.3
%State and municipal bonds


101,471



12.5
%


159,394



17.8
%Total fixed maturities


784,830



96.7
%


854,186



95.4
%Equity securities






0.0
%


583



0.1
%Total
    available-for-sale
    securities


784,830



96.7
%


854,769



95.5
%Short-term investments


26,651



3.3
%


40,653



4.5
%$
811,481



100.0
%

$
895,422



100.0
%       Year Ended December 31,2009


2008(Dollars in thousands)Average investments at cost or amortized cost

$
825,447


$
828,142Pre-tax net investment income

$
44,133


$
39,580Book yield


5.5
%


4.6
%Pre-tax realized investment (losses) gains

$
1,354


$
(26,559
)   other-than-temporary other-than-temporary
 44




---



##### Table of Contents



Unrealized
    Gains and Losses
    Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Fixed maturity securities:U. S. government and agencies

$
24,957


$
303


$



$
25,260Foreign government and corporate debt


9,991



311







10,302Corporate debt


468,998



32,001







500,999Residential mortgage-backed


102,392



5,014







107,406Asset-backed


36,844



2,548







39,392State and municipal bonds


94,967



6,504







101,471Subtotal, fixed maturities


738,149



46,681







784,830Short term investments


26,650



1







26,651Total securities

$
764,799


$
46,682


$



$
811,481      45




---



##### Table of Contents



Credit
    Risk
    December 31, 2009


December 31, 2008Amount


Percent


Amount


Percent(Dollars in thousands)Fixed Maturities:U.S. treasury and agency bonds

$
25,260



3.2
%

$
20,168



2.4
%AAA


169,326



21.6



236,975



27.7AA


160,399



20.4



183,916



21.5A


391,141



49.8



381,936



44.7BBB


24,014



3.1



25,203



3.0BB


1,817



0.2



1,239



0.1B










619



0.1CCC










1,523



0.2CC and lower


239



0.0



48



0.0Not rated


12,634



1.6



2,559



0.3Total fixed maturities

$
784,830



100.0
%

$
854,186



100.0
%Equity Securities:Preferred stocks:A

$





%

$
429



73.6
%BBB










133



22.8C










21



3.6Total equity securities

$





%

$
583



100.0
%     Liquidity
    and Capital Resources
   46




---



##### Table of Contents



47




---



##### Table of Contents



Insurance
    Company Specific
    other-than-temporary other-than-temporary
       48




---



##### Table of Contents



risk-to-capital
    Holding
    Company Specific
  other-than-temporary other-than-temporary
       49




---



##### Table of Contents



Off
    Balance Sheet Arrangements and Aggregate Contractual
    Obligations
    sub-lease
  Critical
    Accounting Policies and Estimates
    Reserve
    for Losses and Loss Adjustment Expenses
    (LAE)
       50




---



##### Table of Contents



Effect on Pretax Loss fromChanges in AssumptionsDecrease in Factors


Increase in FactorsResulting in a


Resulting in an(Decrease) in Pretax


Increase in PretaxLoss


Loss(Dollars in thousands)20% Increase (Decrease) in the Frequency Factors Utilized in the
    Loss Reserve Model

$
(337,969
)

$
273,9385% Increase (Decrease) in the Severity Factors Utilized in the
    Loss Reserve Model

$
(91,709
)

$
86,335Both a 20% Increase (Decrease) in the Frequency Factor and a 5%
    Increase (Decrease) in the Severity Factor Utilized in the Loss
    Reserve Model

$
(418,255
)

$
346,328        51




---



##### Table of Contents



Investments
      Safe
    Harbor Statement under the Private Securities Litigation Reform
    Act of 1995
    
    a deeper or more prolonged recession in the United States
    coupled with the continued decline in home prices and increased
    unemployment levels could increase defaults and limit
    opportunities for borrowers to cure defaults or for us to
    mitigate losses, which could have an adverse material impact on
    our business or results of operations;
    the possibility that the Department may take various actions
    regarding Triad if it does not operate its business in
    accordance with its revised financial and operating plan and the
    Corrective Orders, including instituting receivership
    proceedings, which would likely eliminate all remaining
    stockholder value;
    our ability to operate our business in and maintain a solvent
    run-off;
    our ability to continue as a going concern;
    the ability of TGI to pay its debt service with funds obtained
    from Triad, whether in the form of dividends, payments on the
    surplus note or otherwise, will require the approval of the
    Department, and it is unlikely that such approval will be sought
    or, if sought, will be obtained in the foreseeable future;
    if Triad is not permitted or is otherwise unable to provide
    funds to TGI, the available resources of TGI will be
    insufficient to satisfy future debt service obligations on its
    $35 million outstanding long-term debt;
    our ability to rescind coverage or deny claims could be
    restricted or limited by legal challenges from policyholders and
    loan servicers; 52




---



##### Table of Contents




    our loss reserve estimates are subject to uncertainties and are
    based on assumptions that are currently volatile in the housing
    and mortgage industries and, therefore, settled claims may be
    substantially different from our loss reserves;
    we may not continue to realize benefits from rescissions at the
    levels that we have recently experienced;
    if house prices continue to fall, particularly in non-distressed
    markets, or remain depressed, additional borrowers may default
    and claims could be higher than anticipated;
    if unemployment rates continue to rise or remain at high levels,
    especially in those areas that have already experienced
    significant declines in house prices, defaults and claims could
    be higher than anticipated;
    further economic downturns in regions where we have larger
    concentrations of risk and in markets already distressed could
    have a particularly adverse effect on our financial condition
    and loss development;
    the impact of programs and legislation affecting modifications
    and refinancings of mortgages could materially impact our
    financial performance in run-off;
    our financial condition and performance in run-off could be
    affected by legislation adopted in the future impacting the
    mortgage industry, the GSEs specifically, or the financial
    services industry in general;
    if the GSEs or our lender customers choose to cancel the
    insurance on policies that we insure, our financial performance
    in run-off could be adversely affected;
    a significant decline in interest rates coupled with an increase
    in available credit could increase refinancings and decrease the
    persistency of renewal premiums and the quality of our insurance
    in force;
    if we have failed to properly underwrite mortgage loans under
    contract underwriting service agreements, we may be required to
    assume the costs of repurchasing those loans or face other
    remedies;
    the possibility that there will not be adequate interest in our
    common stock to ensure efficient pricing on the over the counter
    markets; and
    our ability to lower operating expenses to the most efficient
    level while still providing the ability to mitigate losses
    effectively during run-off, which will directly impact our
    financial performance in run-off.    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Item 8.
    Financial
    Statements and Supplementary Data    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Conclusions
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
   53




---



##### Table of Contents



Rules 13a-15(e) 15d-15(e)
  Form 10-K
  Changes
    in Internal Control over Financial Reporting
    Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
     54




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance      Code
    of Ethics
  http://www.triadguaranty.com
    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   55




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules         56




---



##### Table of Contents



SIGNATURES      By:
    /s/  Kenneth
    W. Jones   President and Chief Executive Officer
    th
  Signature

Title/s/  William
    T. Ratliff, IIIWilliam
    T. Ratliff, III

Chairman of the Board/s/  Kenneth
    W. JonesKenneth
    W. Jones

President and Chief Executive Officer
    (Principal Executive Officer and Principal Financial Officer)/s/  Kenneth
    S. DwyerKenneth
    S. Dwyer

Vice President and Chief Accounting Officer
    (Principal Accounting Officer)/s/  Robert
    T. DavidRobert
    T. David

Director/s/  H.
    Lee Durham, Jr.H.
    Lee Durham, Jr.

Director/s/  Deane
    W. HallDeane
    W. Hall

Director/s/  David
    W. WhitehurstDavid
    W. Whitehurst

Director  57




---



##### Table of Contents



ANNUAL
    REPORT ON
    FORM 10-K
  ITEM 8,
    ITEM 15(a)(1) and (2), (3), (b), and (c)
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
  INDEX TO
    EXHIBITS
   CONSOLIDATED
    FINANCIAL STATEMENTS
  FINANCIAL
    STATEMENT SCHEDULES
  CERTAIN
    EXHIBITS
  YEAR
    ENDED DECEMBER 31, 2009
  TRIAD
    GUARANTY INC.
  WINSTON-SALEM,
    NORTH CAROLINA
 58




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
    AND FINANCIAL STATEMENT SCHEDULES  (Item 15(a)
    (1) and (2))
  PageConsolidated Financial StatementsReport of Independent Registered Public
    Accounting Firm


60Consolidated Balance Sheets at December 31,
    2009 and 2008


61Consolidated Statements of Operations for each of
    the two years in the period ended December 31, 2009


62Consolidated Statements of Changes in
    Stockholders (Deficit) Equity for each of the two years in
    the period ended December 31, 2009


63Consolidated Statements of Cash Flows for each of
    the two years in the period ended December 31, 2009


64Notes to Consolidated Financial Statements


65Financial Statement SchedulesSchedules at and for each of the two years in the period ended
    December 31, 2009Schedule I  Summary of
    Investments  Other Than Investments in Related
    Parties


89Schedule II  Condensed Financial
    Information of Registrant


90Schedule IV  Reinsurance


98    59




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  The Board of Directors and Stockholders of Triad Guaranty
    Inc.
              60




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    BALANCE SHEETS  December 31,2009


2008(Dollars in thousands, except per share data)ASSETSInvested assets:Securities
    available-for-sale,
    at fair value:Fixed maturities (amortized cost: $738,149 and $844,964)

$
784,830


$
854,186Equity securities (cost: $0 and $566)






583Short-term investments


26,651



40,653Total invested assets


811,481



895,422Cash and cash equivalents


21,839



39,940Real estate acquired in claim settlement






713Accrued investment income


9,048



10,515Property and equipment, at cost less accumulated depreciation
    ($18,191 and $25,294)


3,515



7,747Reinsurance recoverable, net


233,499



150,848Other assets


45,444



25,349Total assets

$
1,124,826


$
1,130,534LIABILITIES AND STOCKHOLDERS DEFICITLiabilities:Losses and loss adjustment expenses

$
1,537,043


$
1,187,840Unearned premiums


12,153



15,863Amounts payable to reinsurers


7



719Long-term debt


34,540



34,529Deferred payment obligation


168,386



Accrued interest


2,476



1,275Accrued expenses and other liabilities


76,579



26,974Total liabilities


1,831,184



1,267,200Commitments and contingencies  Note 5Stockholders deficit:Preferred stock, par value $0.01 per share
     authorized 1,000,000 shares; no shares issued and
    outstanding






Common stock, par value $0.01 per share  authorized
    32,000,000 shares; issued and outstanding 15,258,128 and
    15,161,259 shares


153



151Additional paid-in capital


113,848



112,629Accumulated other comprehensive income, net of income tax
    liability of $18,575 and $3,265


30,782



6,063Accumulated deficit


(851,141
)


(255,509
)Deficit in assets


(706,358
)


(136,666
)Total liabilities and stockholders deficit

$
1,124,826


$
1,130,534    61




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENT OF OPERATIONS  Year Ended December 31,2009


2008(Dollars in thousands, except per share data)Revenue:Premiums written:Direct

$
217,012


$
316,310Ceded


(40,872
)


(60,777
)Net premiums written


176,140



255,533Change in unearned premiums


3,518



1,890Earned premiums


179,658



257,423Net investment income


44,133



39,580Net realized investment gains (losses)


1,354



(26,559
)Other income


12,666



8237,811



270,452Losses and expenses:Net losses and loss adjustment expenses


807,627



923,301Interest expense


6,034



3,557Policy acquisition costs






39,416Other operating expenses


35,911



58,709849,572



1,024,983Loss before income tax benefit


(611,761
)


(754,531
)Income tax benefit:Current


(2,818
)


(2,012
)Deferred


(13,311
)


(121,392
)(16,129
)


(123,404
)Net loss

$
(595,632
)

$
(631,127
)Loss per common and common equivalent share:Basic and diluted

$
(39.70
)

$
(42.27
)Shares used in computing loss per common and common
    equivalent share:Basic and diluted


15,002,275



14,929,692    62




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS (DEFICIT)
    EQUITY  Accumulated


RetainedAdditional


Other


EarningsCommon


Paid-In


Comprehensive


(AccumulatedStock


Capital


Income


Deficit)


Total(Dollars in thousands)Balance at January 1, 2008


149



109,679



13,405



375,618



498,851Net loss














(631,127
)


(631,127
)Other comprehensive
    income-net
    of taxChange in unrealized (losses) on investments










(3,264
)






(3,264
)Foreign currency translation adjustment










(4,078
)






(4,078
)Other comprehensive loss


















(7,342
)Comprehensive loss


















(638,469
)Share-based compensation






4,257











4,257Tax effect of exercise of non-qualified stock options and
    vesting of restricted stock






(1,305
)










(1,305
)Net issuance of restricted stock under stock incentive plan


2



(2
)










Balance at December 31, 2008


151



112,629



6,063



(255,509
)


(136,666
)Net loss














(595,632
)


(595,632
)Other comprehensive
    income-net
    of taxChange in unrealized gains on investments










24,719







24,719Other comprehensive loss


















24,719Comprehensive loss


















(570,913
)Share-based compensation






1,221











1,221Net issuance of restricted stock under stock incentive plan


2



(2
)










Balance at December 31, 2009

$
153


$
113,848


$
30,782


$
(851,141
)

$
(706,358
)    63




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOW  Year Ended December 31,2009


2008(Dollars in thousands)Operating activitiesNet loss

$
(595,632
)

$
(631,127
)Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities:Losses, loss adjustment expenses and unearned premium reserves


345,493



825,971Accrued expenses and other liabilities


49,605



16,395Deferred payment obligation


168,386



Income taxes recoverable


(10,473
)


(1,234
)Reinsurance, net


(83,363
)


(150,839
)Accrued investment income


1,467



(286
)Policy acquisition costs deferred






(3,173
)Policy acquisition costs






39,416Net realized investment (gains) losses


(1,354
)


26,559Provision for depreciation


2,402



4,951Accretion of discount on investments


(1,812
)


2,737Deferred income taxes


(13,311
)


(121,392
)Prepaid federal income taxes


15



115,993Real estate acquired in claim settlement, net of write-downs


713



10,147Accrued interest


1,201



(80
)Other assets


392



8,878Other operating activities


1,361



4,222Net cash (used in) provided by operating activities


(134,910
)


147,138Investing activitiesSecurities
    available-for-sale:Purchases  fixed maturities


(182,251
)


(839,372
)Sales  fixed maturities


215,645



633,928Maturities  fixed maturities


67,781



40,473Sales  equities


762



287Purchases of other investments


(873
)


Net change in short-term investments


13,915



14,074Disposal (purchases) of property and equipment


1,830



(1,296
)Net cash provided by (used in) investing activities


116,809



(151,906
)Financing activitiesRepayment of revolving credit facility






(80,000
)Excess tax benefits from share-based compensation






15Net cash used in financing activities






(79,985
)Foreign currency translation adjustment on cash and cash
    equivalents






(118
)Net change in cash and cash equivalents


(18,101
)


(84,871
)Cash and cash equivalents at beginning of year


39,940



124,811Cash and cash equivalents at end of year

$
21,839


$
39,940Supplemental schedule of cash flow informationCash paid (received) during the period for:Income taxes and United States Mortgage Guaranty Tax and Loss
    Bonds

$
7,721


$
(122,111
)Interest

$
2,766


$
3,631    64




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##### Table of Contents



TRIAD
    GUARANTY INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 1.
    Accounting
    Policies  Business
  Form 10-K and/or
  Basis
    of Presentation
    Accounting
    Standards Codification
  The FASB
    Accounting Standards Codification and the Hierarchy of Generally
    Accepted Accounting Principles 105-10, 105-10),
 65




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Consolidation
    Use of
    Estimates
    Investments
  available-for-sale available-for-sale other-than-temporary. other-than-temporary
    Cash
    and Cash Equivalents
    Other
    Income
    Real
    Estate Acquired in Claim Settlement
   66




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Premium
    Deficiency Reserve and Deferred Policy Acquisition
    Costs
      Property
    and Equipment
      Loss
    and Loss Adjustment Expense Reserves
  loan-to-value,
     67




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Reinsurance
    Income
    Taxes
      Income Taxes Worker,
    Homeownership and Business Assistance Act of 2009,
   68




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Income
    Recognition
      Significant
    Customers
    Share-Based
    Compensation
  Compensation  Retirement Benefits
  (Loss)
    Earnings Per Share (EPS)
    Comprehensive
    Income (Loss)
  available-for-sale
 69




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008(Dollars in thousands)Unrealized gain (losses) arising during the period, before taxes

$
39,384


$
(31,580
)Income tax (expense) benefit


(13,784
)


11,053Unrealized gains (losses) arising during the period, net of taxes


25,600



(20,527
)Less reclassification adjustment:Gain (Loss) realized in operations


1,354



(26,559
)Income tax (expense) benefit


(473
)


9,296Reclassification adjustment for losses realized in operations


881



(17,263
)Change in unrealized losses on investments


24,719



(3,264
)Foreign currency translation adjustment, before taxes






(5,531
)Income tax benefit






1,453
(1)Foreign currency translation adjustment, after taxes






(4,078
)Other comprehensive income (loss)

$
24,719


$
(7,342
)     (1)
    
    Tax effect calculated from unrealized gain on subsidiary of
    $4,151.  Recent
    Accounting Pronouncements
  No. 2010-06, Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements 2010-06). 2010-06 820-10. 2010-06 820-10 2010-06 2010-06
  2009-17, Consolidations (Topic 810)  Improvements to
    Financial Reporting by Enterprises Involved with Variable
    Interest Entities 2009-17). 2009-17 Amendments to FASB Interpretation
    No. 46(R) Consolidations
 70




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2009-17 2009-17
  2009-16, Transfers and Servicing (Topic 860)  Accounting
    for Transfers of Financial Assets 2009-16). 2009-16 Accounting for Transfers of
    Financial Assets 2009-16 Consolidations 2009-16 2009-16
  No. 2009-05, Fair Value Measurement and Disclosures: Measuring Liabilities
    at Fair Value 2009-05), 2009-05 2009-05
  855-10, Subsequent Events 855-10). 855-10 855-10 855-10 855-10
  Fair Value Measurements and
    Disclosures
  Investments  Debt and Equity Securities (ASC 320-10). other-than-temporary other-than-temporary
   71




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    805-10, Business Combinations 805-10), 805-10
  Consolidations 810-10-65,
  2.
    Going
    Concern  Form 10-K other-than-temporary
   72




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      3.
    Investments    December 31, 2009Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Available-for-sale
    securities:Fixed maturity securities:U.S. government and agencies

$
24,957


$
303


$



$
25,260Foreign government and corporate debt


9,991



311







10,302Corporate debt


468,998



32,001







500,999Residential mortgage-backed


102,392



5,014







107,406Asset-backed


36,844



2,548







39,392State and municipal bonds


94,967



6,504







101,471Total fixed maturity securities


738,149



46,681







784,830Short-term investments


26,650



1







26,651$
764,799


$
46,682


$



$
811,481   73




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2008Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Available-for-sale
    securities:Fixed maturity securities:U. S. government and agencies

$
7,646


$
350


$



$
7,996Foreign government and corporate debt


17,010



302







17,312Corporate debt


474,572



2,484







477,056Residential mortgage-backed


123,394



3,285







126,679Asset-backed


65,667



82







65,749State and municipal bonds


156,675



2,719







159,394Total fixed maturity securities


844,964



9,222







854,186Equity securities


566



17







583Short-term investments


40,565



88







40,653$
886,095


$
9,327


$



$
895,422     Available-for-SaleAmortized


ValueCost


Fair(Dollars in thousands)Maturity:One year or less

$
119,736


$
122,790After one year through five years


390,428



416,759After five years through ten years


86,939



93,897After ten years


141,046



151,384Total

$
738,149


$
784,830    74




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Realized
    Gains (Losses) Related to Investments
  other-than-temporary
  Year Ended December 31,2009


2008(Dollars in thousands)Securities
    available-for-sale:Fixed maturity securities:Gross realized gains

$
7,087


$
10,262Gross realized losses


(5,820
)


(38,570
)Equity securities:Gross realized gains


71



44Gross realized losses


(111
)


(1,705
)Foreign currency gross realized gains


85



3,404Other investment gains


42



6Net realized gains (losses)

$
1,354


$
(26,559
)   other-than-temporary
    Year Ended December 31,2009


2008(Dollars in thousands)Income:Fixed maturities

$
44,563


$
37,549Preferred stocks


14



127Cash, cash equivalents and short-term investments


659



2,97345,236



40,649Expenses


(1,103
)


(1,069
)Net investment income

$
44,133


$
39,580     4.
    Deferred
    Policy Acquisition Costs (DAC)   75




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    5.
    Reserve
    for Losses and LAE    2009


2008(Dollars in thousands)Balance at January 1,

$
1,187,840


$
359,939Less: reinsurance recoverables


(156,837
)


(7,305
)1,031,003



352,634Incurred losses and loss adjustment expenses net of reinsurance
    recoveries (principally in respect of default notices received
    in):Current year


719,666



873,568Deficiency on prior years


87,961



49,733Total incurred losses and loss adjustment expenses


807,627



923,301Loss and loss adjustment expense payments net of reinsurance
    recoveries (principally in respect of default notices received
    in):Current year


40,085



38,974Prior years


490,708



205,958Total loss and loss adjustment expense payments


530,793



244,932Net ending balance at December 31,


1,307,837



1,031,003Reinsurance recoverables


229,206



156,837Balance at December 31,

$
1,537,043


$
1,187,840      76




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    6.
    Commitments    December 31, 2009(Dollars in thousands)2010

$
1,5712011


1,4712012


1,3772013


$
4,419     7.
    Federal
    Income Taxes    Year Ended December 31,2009


2008(Dollars in thousands)Income tax benefit computed at statutory rate

$
(214,116
)

$
(263,015
)(Decrease) increase in taxes resulting from:Tax-exempt interest


(1,806
)


(7,353
)Valuation allowance


204,373



145,335Other


(4,580
)


1,629Income tax benefit

$
(16,129
)

$
(123,404
)  77




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008(Dollars in thousands)Deferred tax assetsUnearned premiums

$
2,084


$
3,924Impairments on securities


7,229



11,258Losses and loss adjustment expenses


248,398



92,431Net operating loss carryforwards and other credits


104,883



39,635Other


4,380



2,784Total deferred tax assets


366,974



150,032Valuation allowance


(349,708
)


(145,335
)Net deferred tax assets


17,266



4,697Deferred tax liabilitiesUnrealized investment gains


16,576



3,265Other


690



1,432Total deferred tax liabilities


17,266



4,697Net deferred tax liability

$



$
       Worker,
    Homeownership and Business Assistance Act of 2009,
 78




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##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Insurance
    in Force, Dividend Restriction, and Statutory Results    Risk-to-Capital
    
    Required Triad to submit a corrective plan to the Department;
    Prohibits all stockholder dividends from Triad to TGI without
    the prior approval of the Department;
    Prohibits interest and principal payments on Triads
    surplus note to TGI without the prior approval of the Department;
    Restricts Triad from making any payments or entering into any
    transaction that involves the transfer of assets to, or
    liabilities from, any affiliated parties without the prior
    approval of the Department;
    Requires Triad to obtain prior written approval from the
    Department before entering into certain transactions with
    unaffiliated parties;
    Requires Triad to meet with the Department in person or via
    teleconference as necessary; and
    Requires Triad to furnish to the Department certain reports,
    agreements, actuarial opinions and information on an ongoing
    basis at specified times.     79




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    Effective June 1, 2009, all valid claims under Triads
    mortgage guaranty insurance policies are settled 60% in cash and
    40% by recording a DPO;
    At March 31, 2009, Triad was required to adjust surplus and
    reserves reflecting the impact of the second Corrective Order on
    future settled claims;
    The DPO requires that Triad accrue a carrying charge based on
    the investment yield earned by Triads investment portfolio;
    Triad will establish an escrow account at least equal to the DPO
    balance and any associated carrying charges;
    Triad will require that any risk or obligation of any captive
    reinsurer must be paid in full, and will deposit any excess
    reinsurance recovery above the 60% cash payment into an escrow
    account;
    Payment of the DPO and the carrying charge is subject to
    Triads future financial performance and requires the
    approval of the Department;
    Procedures to account for the impact of the second Corrective
    Order in the financial statements prepared in accordance with
    SAP;
    Upon payment of a claim under these provisions, Triad is deemed
    to have fully satisfied its obligations under the respective
    insurance policy;
    Other restrictions and requirements affecting the payment and
    transferability of the DPOs and associated carrying
    charge; and
    Certain reporting requirements.    Form 10-K
  9.
    Employee
    Benefit Plans   80




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      10.
    Reinsurance      Year Ended December 31,2009


2008(Dollars in thousands)Earned premiums:Direct

$
220,530


$
318,199Assumed






1Ceded


(40,872
)


(60,777
)Net earned premiums

$
179,658


$
257,423Losses and loss adjustment expenses:Direct

$
940,034


$
1,073,328Assumed






1Ceded


(132,407
)


(150,028
)Net losses and loss adjustment expenses

$
807,627


$
923,301       11.
    Long-Term
    Stock Incentive Plan   81




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Weighted-


Aggregate


Weighted-AverageNumber of


Average


Intrinsic


Remaining ContractualShares


Exercise Price


Value


Term(Dollars in thousands)Outstanding, January 1, 2009


391,911


$
38.80Granted






Exercised






Cancelled


31,997



25.77Outstanding, December 31, 2009


359,914



39.96


$








3.8 yearsExercisable, December 31, 2009


359,914



39.96


$








3.8 years       Number of


Weighted-AverageShares


Grant-Date Fair ValueNonvested, January 1, 2009


281,308


$
6.40Granted


60,794



1.16Vested


78,609



11.20Cancelled






Nonvested, December 31, 2009


263,493



3.76      82




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      12.
    Fair
    Value Measurement  Fair
    Value of Financial Instruments
    December 31, 2009


December 31, 2008Carrying


Fair


Carrying


FairValue


Value


Value


Value(Dollars in thousands)Financial AssetsFixed maturity securities
    available-for-sale

$
784,830


$
784,830


$
854,186


$
854,186Equity securities
    available-for-sale










583



583Short-term investments


26,651



26,651



40,653



40,653Cash and cash equivalents


21,839



21,839



39,940



39,940Financial LiabilitiesLong-term debt


34,540



7,268



34,529



10,124   Valuation
    Methodologies and Associated Inputs
  Investments
     83




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale available-for-sale
  Short-term
    Investments
    Cash and
    Cash Equivalents
    Long-Term
    Debt
    Fair
    Value of Investments
      Level 1:
    Unadjusted quoted prices in active markets that are accessible
    at the measurement date for identical, unrestricted assets or
    liabilities.Level 2:
    Quoted prices in markets that are not active, or inputs that are
    observable either directly or indirectly, for substantially the
    full term of the asset or liability.Level 3:
    Prices or valuation techniques that require inputs that are both
    significant to the fair value measurement and unobservable
    (i.e., supported with little or no market activity). 84




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


InputsDecember 31, 2009


(Level 1)


(Level 2)


(Level 3)(Dollars in thousands)AssetsSecurities
    available-for-saleFixed maturities

$
784,830


$



$
782,836


$
1,994Short-term investments


26,651







26,651



Cash and cash equivalents


21,839







21,839



Total

$
833,320


$



$
831,326


$
1,994   Fair Value Measurements at Reporting Date UsingQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


InputsDecember 31, 2008


(Level 1)


(Level 2)


(Level 3)(Dollars in thousands)AssetsSecurities
    available-for-saleFixed maturities

$
854,186


$



$
851,651


$
2,535Equity securities


583



583







Short-term investments


40,653







40,653



Cash and cash equivalents


39,940







39,940



Total

$
935,362


$
583


$
932,244


$
2,535  85




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fair
    Value Measurement Using Significant
    Unobservable Inputs (Level 3)
    Certain Bonds in Fixed Maturities AFS Portfolio
  Year Ended December 31,2009


2008(Dollars in thousands)Beginning balance

$
2,535


$
7,402Total gains and losses (realized and unrealized):Included in operations


(341
)


(270
)Included in other comprehensive income


293



(819
)Purchases, issuances and settlements


(493
)


(3,983
)Transfers in and/or out of Level 3






205Ending balance

$
1,994


$
2,535The amount of total gains and losses for the period included in
    operations attributable to the change in unrealized gains or
    losses relating to assets still held at the reporting date

$
(49
)

$
(1,815
)   13.
    Long-term
    Debt    14.
    Exit
    Costs       86




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Other
    Income    16.
    Contingencies           87




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    17.
    Subsequent
    Events  Form 10-K
   88




---



##### Table of Contents



SCHEDULE I
    SUMMARY OF INVESTMENTS  OTHER THAN INVESTMENTS IN
    RELATED PARTIES
    TRIAD GUARANTY INC.
    December 31, 2009  Amount atCost or





Which ShownAmortized


Fair


in BalanceCost


Value


Sheet(Dollars in thousands)Fixed maturity securities,
    available-for-sale:Bonds:U. S. government and agencies

$
24,958


$
25,261


$
25,261Foreign government and corporate debt


9,991



10,302



10,302Corporate debt


468,999



501,000



501,000Residential mortgage-backed


102,391



107,405



107,405Asset-backed


36,844



39,392



39,392State and municipal bonds


94,966



101,470



101,470Total


738,149



784,830



784,830Equity securities,
    available-for-sale:Short-term investments


26,650



26,651



26,651Total investments other than investments in related parties

$
764,799


$
811,481


$
811,481  89




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##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED BALANCE SHEETS
    TRIAD GUARANTY INC.
    (Parent Company)  December 31,2009


2008(Dollars in thousands)ASSETSFixed maturities,
    available-for-sale

$
4,710


$
5,045Notes receivable from subsidiary






25,000Short-term investments


956



1,752Cash


3,016



3,963Accrued investment income


77



2,244Income taxes recoverable






53Other assets


182



1Total assets

$
8,941


$
38,058LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYLiabilities:Long-term debt

$
34,540


$
34,529Accrued interest


1,275



1,275Investment in subsidiaries deficit


679,469



138,918Accrued expenses and other liabilities


15



2Total liabilities


715,299



174,724Stockholders (deficit) equity:Common stock


153



151Additional paid-in capital


113,848



112,629Accumulated other comprehensive income


30,782



6,063Retained earnings (accumulated deficit)


(851,141
)


(255,509
)Total stockholders (deficit) equity


(706,358
)


(136,666
)Total liabilities and stockholders (deficit) equity

$
8,941


$
38,058    90




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##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED STATEMENTS OF OPERATIONS
    TRIAD GUARANTY INC.
    (Parent Company)
  Year Ended December 31,2009


2008(Dollars in thousands)Revenue:Investment income:Interest (loss) income

$
(1,873
)

$
3,040Realized investment (loss) gains


(24,977
)


3,188Net investment (loss) income


(26,850
)


6,228Other Income


2,248



(24,602
)


6,228Expenses:Interest expense


2 ,776



3,558Operating expenses


3 ,116



4,5275,892



8,085Loss before federal income taxes and deficit in undistributed
    loss of subsidiaries


(30,494
)


(1,857
)Income tax benefit:Current


24



831Deferred


38



3,83762



4,668(Loss) Income before equity in undistributed loss of subsidiaries


(30,432
)


2,811Equity in undistributed loss of subsidiaries


(565,200
)


(633,938
)Net loss

$
(595,632
)

$
(631,127
)    91




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##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED STATEMENTS OF CASH FLOWS
    TRIAD GUARANTY INC.
    (Parent Company)
  Year Ended December 31,2009


2008(Dollars in thousands)Operating Activities:Net loss

$
(595,632
)

$
(631,127
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Equity in undistributed loss of subsidiaries


565,200



633,938Accrued investment loss (income)


2,167



(731
)Other assets


(181
)


366Deferred income taxes


(38
)


(3,837
)Income taxes recoverable


53



76Accretion of discount on investments


(11
)


39Amortization of deferred compensation


1,220



4,257Amortization of debt issue costs


11



9Accrued interest






(80
)Realized investment losses (gains) on securities


24,977



(3,188
)Other liabilities


13



(972
)Other operating activities


87



(37
)Net cash used in operating activities


(2,134
)


(1,287
)Investing Activities:Fixed maturities:Purchases


(1,864
)


(5,131
)Sales and maturities


2,255



41,855Equity securities:Sales






44,295Change in short-term investments


796



2,217Net cash (used in) provided by investing activities


1,187



83,236Financing Activities:Proceeds from revolving credit facility






(80,000
)Excess tax benefits related to share based payments






15Net cash provided by (used in) financing activities






(79,985
)(Decrease) Increase in cash


(947
)


1,964Cash at beginning of year


3,963



1,999Cash at end of year

$
3,016


$
3,963    92




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##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    TRIAD GUARANTY INC.
    (Parent Company)
    SUPPLEMENTARY NOTES
  1.
    Basis of
    Presentation and Significant Accounting Policies  Form 10-K.
  2.
    Nature of
    Operations  Form 10-K and/or
  3.
    Going
    Concern  Form 10-K other-than-temporary
 93




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##### Table of Contents




    Required Triad to submit a corrective plan to the Department;
    Prohibits all stockholder dividends from Triad to TGI without
    the prior approval of the Department;
    Prohibits interest and principal payments on Triads
    surplus note to TGI without the prior approval of the Department;
    Restricts Triad from making any payments or entering into any
    transaction that involves the transfer of assets to, or
    liabilities from, any affiliated parties without the prior
    approval of the Department;
    Requires Triad to obtain prior written approval from the
    Department before entering into certain transactions with
    unaffiliated parties;
    Requires Triad to meet with the Department in person or via
    teleconference as necessary; and
    Requires Triad to furnish to the Department certain reports,
    agreements, actuarial opinions and information on an ongoing
    basis at specified times.     94




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##### Table of Contents




    Effective June 1, 2009, all valid claims under Triads
    mortgage guaranty insurance policies are settled 60% in cash and
    40% by recording a DPO;
    At March 31, 2009, Triad was required to adjust surplus and
    reserves reflecting the impact of the second Corrective Order on
    future settled claims;
    The DPO requires that Triad accrue a carrying charge based on
    the investment yield earned by Triads investment portfolio;
    Triad will establish an escrow account at least equal to the DPO
    balance and any associated carrying charges;
    Triad will require that any risk or obligation of any captive
    reinsurer must be paid in full, and will deposit any excess
    reinsurance recovery above the 60% cash payment into an escrow
    account;
    Payment of the DPO and the carrying charge is subject to
    Triads future financial performance and requires the
    approval of the Department;
    Procedures to account for the impact of the second Corrective
    Order in the financial statements prepared in accordance with
    SAP;
    Upon payment of a claim under these provisions, Triad is deemed
    to have fully satisfied its obligations under the respective
    insurance policy;
    Other restrictions and requirements affecting the payment and
    transferability of the DPOs and associated carrying
    charge; and
    Certain reporting requirements.    Form 10-K
 95




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##### Table of Contents



4.
    Investments    At December 31, 2009Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Fixed maturity securities:US government and agencies

$
232


$



$



$
232Corporate debt


4,371



107







4,478Total


4,603



107







4,710Short-term investments


955



1







956Total

$
5,558


$
108


$



$
5,666   At December 31, 2008Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(Dollars in thousands)Fixed maturity securities:Corporate

$
5,040


$
5


$



$
5,045Total


5,040



5







5,045Short-term investments


1,752











1,752Total

$
6,792


$
5


$



$
6,797     Year Ended December 31,2009


2008(Dollars in thousands)Income:Fixed maturities

$
219


$
485Cash and short-term investments


70



371Interest on note receivable from subsidiary (Note 5)


(2,156
)


2,225(1,867
)


3,081Expenses


6



41Net investment income

$
(1,873
)

$
3,040   5.
    Note
    Receivable from Subsidiary  other-than-temporary other-than-temporary
 96




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##### Table of Contents



6.
    Long-term
    Debt   97




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##### Table of Contents



SCHEDULE IV 
    REINSURANCE
    TRIAD GUARANTY INC.
    MORTGAGE INSURANCE PREMIUM EARNED
    Years Ended December 31, 2009 and 2008  Ceded To


Assumed





Percentage ofGross


Other


From Other


Net


Amount AssumedAmount


Companies


Companies


Amount


to Net(Dollars in thousands)2009

$
220,530


$
40,872


$



$
179,658



0.0
%2008

$
318,199


$
60,777


$
1


$
257,423



0.0
%  98




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##### Table of Contents



EXHIBIT INDEXForm 10-K
    for Fiscal Year Ended December 31, 2009  ExhibitNumber

Description of Document2
.1

Asset Purchase Agreement between Triad Guaranty, Inc., Triad
    Guaranty Insurance Corporation and Essent Guaranty, Inc., dated
    October 7, 2009; previously filed as Exhibit 10.60 to
    the Registrants Current Report on
    Form 8-K,
    filed October 7, 2009, and herein incorporated by reference.3
.1

Certificate of Incorporation of the Registrant, as amended
    May 23, 1997; previously filed as Exhibit 3.1 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 1997, filed
    August 12, 1997, and herein incorporated by reference.3
.2

Certificate of Amendment of Certificate of Incorporation of the
    Registrant, effective as of May 20, 1998; previously filed
    as Exhibit 3.2 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2007, filed
    April 1, 2008, and herein incorporated by reference.3
.3

Bylaws of the Registrant, as amended on March 21, 2003;
    previously filed as Exhibit 3.2 to the Registrants
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002, filed
    March 27, 2003, and herein incorporated by reference.3
.4

Amendment to Bylaws of the Registrant, effective
    November 20, 2008; previously filed as Exhibit 3.2 to
    the Registrants Current Report on
    Form 8-K,
    filed November 25, 2008, and herein incorporated by
    reference.4
.1

Form of common stock certificate; previously filed as
    Exhibit 4 to the Registrants Registration Statement
    on
    Form S-1,
    filed October 22, 1993, and herein incorporated by
    reference.4
.2

Indenture, dated as of January 15, 1998, between the
    Registrant and Bankers Trust Company; previously filed as
    Exhibit 4.2 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1997, filed
    March 26, 1998, and herein incorporated by reference.10
.6

Registration Agreement among the Registrant, Collateral
    Investment Corp. and Collateral Mortgage, Ltd.; previously filed
    as Exhibit 10.6 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1993, filed
    March 28, 1994, and herein incorporated by reference.10
.21

Excess of Loss Reinsurance Agreement, effective as of
    December 31, 1999, between Triad Guaranty Insurance
    Corporation, Capital Mortgage Reinsurance Company and Federal
    Insurance Company; previously filed as Exhibit 10.21 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1999, filed
    March 29, 2000, and herein incorporated by reference.10
.22

Excess of Loss Reinsurance Agreement, effective as of
    January 1, 2001, between Triad Guaranty Insurance
    Corporation and Ace Capital Mortgage Reinsurance Company;
    previously filed as Exhibit 10.22 to the Registrants
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2000, filed
    March 30, 2001, and herein incorporated by reference.10
.23

Employment Agreement, dated May 1, 2002, between the
    Registrant and Earl F. Wall; previously filed as
    Exhibit 10.23 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2002, filed
    August 14, 2002, and herein incorporated by reference.*10
.26

Employment Agreement, dated June 14, 2002, between the
    Registrant and Kenneth C. Foster; previously filed as
    Exhibit 10.26 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2002, filed
    March 27, 2003, and herein incorporated by reference.*10
.27

Consulting Agreement, dated December 9, 2004, by and
    between the Registrant, Triad Guaranty Insurance Corporation,
    Triad Guaranty Assurance Company and Collateral Mortgage, Ltd.;
    previously filed as Exhibit 10.27 to the Registrants
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004, filed
    March 14, 2005, and herein incorporated by reference.10
.28

Agreement for Administrative Services, effective January 1,
    2005, between and among Collateral Mortgage, Ltd., Collat, Inc.,
    New South Federal Savings Bank, the Registrant and Triad
    Guaranty Insurance Corporation; previously filed as
    Exhibit 10.28 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004, filed
    March 14, 2005, and herein incorporated by reference.10
.30

Exchange Agreement, dated as of May 18, 2005, by and among
    the Registrant, Collateral Investment Corp. and the Shareholders
    of Collateral Investment Corp. listed on the signature pages
    thereto; previously filed as Exhibit 10.30 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2005, filed
    August 8, 2005, and herein incorporated by reference. 99




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##### Table of Contents



ExhibitNumber

Description of Document10
.32

Employment Agreement and Related Letter of Agreement, dated
    September 9, 2005, between the Registrant and Mark K.
    Tonnesen; previously filed as Exhibit 10.32 to the
    Registrants Current Report on
    Form 8-K,
    filed September 16, 2005, and herein incorporated by
    reference.*10
.35

Form of Triad Guaranty Inc. 2006 Long-Term Stock Incentive Plan;
    previously filed as Exhibit 10.35 to the Registrants
    Current Report on
    Form 8-K,
    filed May 23, 2006, and herein incorporated by reference.*10
.37

Agreement, dated March 30, 2006, entered into between the
    Registrant and Kenneth W. Jones; previously filed as
    Exhibit 10.1 to the Registrants Current Report on
    Form 8-K,
    filed April 5, 2006, and herein incorporated by reference.*10
.40

Amendment to Letter Agreement, dated December 26, 2006,
    between Mark K. Tonnesen and the Registrant; previously filed as
    Exhibit 10.40 to the Registrants Current Report on
    Form 8-K,
    filed December 28, 2006, and herein incorporated by
    reference.*10
.41

Executive/Key Employee Phantom Stock Award Agreement between the
    Registrant and Mark K. Tonnesen, dated December 26, 2006;
    previously filed as Exhibit 10.41 to the Registrants
    Current Report on
    Form 8-K,
    filed December 28, 2006, and herein incorporated by
    reference.*10
.43

Form of Executive/Key Employee Restricted Stock Agreement under
    Triad Guaranty Inc. 2006 Long-Term Stock Incentive Plan;
    previously filed as Exhibit 10.43 to the Registrants
    Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2006, filed
    March 16, 2007, and herein incorporated by reference.*10
.44

Form of Executive Stock Option Agreement under Triad Guaranty
    Inc. 2006 Long-Term Stock Incentive Plan; previously filed as
    Exhibit 10.44 to the Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2006, filed
    March 16, 2007, and herein incorporated by reference.*10
.45

Form of Outside Director Restricted Stock Agreement under Triad
    Guaranty Inc. 2006 Long-Term Stock Incentive Plan; previously
    filed as Exhibit 10.45 to the Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2006, filed
    March 16, 2007, and herein incorporated by reference.*10
.46

Form of Outside Director Stock Option Agreement under Triad
    Guaranty Inc. 2006 Long-Term Stock Incentive Plan; previously
    filed as Exhibit 10.46 to the Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2006, filed
    March 16, 2007, and herein incorporated by reference.*10
.47

Summary of Director Compensation Plan, effective as of
    May 17, 2007; previously filed as Exhibit 10.47 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2007, filed
    April 1, 2008, and herein incorporated by reference.*10
.48

Credit Agreement, dated as of June 28, 2007, among the
    Registrant, Bank of America, N.A., and the other lenders party
    thereto; previously filed as Exhibit 10.47 to the
    Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2007, filed
    August 9, 2007, and herein incorporated by reference.10
.49

Form of 2008 Executive/Key Employee Restricted Stock Award
    Agreement pursuant to the 2006 Long-Term Stock Incentive Plan;
    previously filed as Exhibit 10.48 to the Registrants
    Current Report on
    Form 8-K,
    filed March 4, 2008 and herein incorporated by reference.*10
.50

Employment Agreement, dated March 28, 2008, between the
    Registrant and Kenneth C. Foster; previously filed as
    Exhibit 10.50 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2007, filed April 1,
    2008, and herein incorporated by reference.*10
.51

Summary of 2008 Executive Retention Program; previously filed as
    Exhibit 10.51 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended March 31, 2008, filed
    May 12, 2008, and herein incorporated by reference.*10
.52

Summary of 2008 Executive Severance Program; previously filed as
    Exhibit 10.52 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarterly period ended March 31, 2008, filed
    May 12, 2008, and herein incorporated by reference.*10
.53

Amended and Restated Employment Agreement, dated April 23,
    2008, between the Registrant and Mark K. Tonnesen;
    previously filed as Exhibit 10.53 to the Registrants
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended March 31, 2008, filed
    May 12, 2008, and herein incorporated by reference.*10
.54

Letter Agreement, dated July 17, 2008, between the
    Registrant and Mark K. Tonnesen; previously filed as
    Exhibit 10.54 to the Registrants Current Report on
    Form 8-K,
    filed July 17, 2008, and herein incorporated by reference.* 100




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##### Table of Contents



ExhibitNumber

Description of Document10
.55

Letter Agreement, dated July 17, 2008, between the
    Registrant and William T. Ratliff, III; previously filed as
    Exhibit 10.55 to the Registrants Current Report on
    Form 8-K,
    filed July 17, 2008, and herein incorporated by reference.*10
.56

Letter Agreement, dated October 22, 2008, between the
    Registrant and Kenneth W. Jones; previously filed as
    Exhibit 10.56 to the Registrants Current Report on
    Form 8-K,
    filed October 22, 2008, and herein incorporated by
    reference.*10
.57

Summary of 2009 Executive Compensation Program; previously filed
    as Exhibit 10.57 to the Registrants Current Report on
    Form 8-K,
    filed November 25, 2008, and herein incorporated by
    reference.*10
.58

Form of Executive/Key Employee Phantom Stock Award Agreement
    under Triad Guaranty Inc. 2006 Long-Term Stock Incentive Plan;
    previously filed as Exhibit 10.58 to the Registrants
    Current Report on
    Form 8-K,
    filed January 29, 2009, and herein incorporated by
    reference.*10
.59

Summary of Board of Directors Compensation Program, effective
    October 2008, previously filed as Exhibit 10.59 to the
    Registrants Annual Report on
    Form 10-K,
    filed March 16, 2009, and herein incorporated by reference.*10
.60

Services Agreement between Triad Guaranty, Inc., Triad Guaranty
    Insurance Corporation and Essent Guaranty, Inc., effective
    December 1, 2009.10
.61

Summary of Board of Directors Compensation Program, effective
    October 1, 2009.*21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered Public Accounting Firm31
.1

Certification of Principal Executive Officer and Principal
    Financial Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a) of the Securities Exchange Act of 1934, as amended,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.32
.1

Certification of Principal Executive Officer and Principal
    Financial Officer pursuant to 18 U.S.C. Section 1350,
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.**Our SEC file number reference for documents filed with the SEC
    pursuant to the Securities Exchange Act of 1934, as amended, is
    000-22342.     *
    
    Management contract or compensatory plan or arrangement.**
    
    The following exhibit shall not be deemed filed for
    purposes of Section 18 of the Securities Exchange Act of
    1934, or otherwise subject to the liability of that Section. In
    addition, Exhibit No. 32.1 shall not be deemed
    incorporated into any filing under the Securities Act of 1933 or
    the Securities Exchange Act of 1934. 101