##### 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, 2007oro

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:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share

The NASDAQ Stock Markets LLC
    (NASDAQ Global Select Market)   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

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

Smaller reporting
    company o   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.
    Proxy Statement for 2008 Annual Meeting
    of Stockholders

Part III




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##### 





TABLE OF
    CONTENTS
   
 PagePart IItem 1.


Business


1Item 1A.


Risk Factors


22Item 1B.


Unresolved Staff Comments


34Item 2.


Properties


34Item 3.


Legal Proceedings


34Item 4.


Submission of Matters to a Vote of Security
    Holders


34Part IIItem 5.


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


35Item 6.


Selected Financial Data


36Item 7.


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


37Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


65Item 8.


Financial Statements and Supplementary Data


65Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


65Item 9A.


Controls and Procedures


65Item 9B.


Other Information


68Part IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


68Item 11.


Executive Compensation


68Item 12.


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


68Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


69Item 14.


Principal Accounting Fees and Services


69Part IVItem 15.


Exhibits, Financial Statement Schedules


69Signatures


70Index to Consolidated Financial Statements and
    Financial Statement Schedules


72Exhibit Index


101Exhibit 3.2Exhibit 10.34Exhibit 10.47Exhibit 10.50Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I  Item 1.
    Business  Overview
    of Triad and Industry
          Form 10-K.
  (336) 723-1282.
  www.triadguaranty.com Form 10-K, Form 10-Q, Form 8-K,
 1




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Overview
    of Market Conditions
                 2




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Current
    Developments
  risk-in-force
    Mortgage
    Insurance Products
    Primary
    Insurance
   3




---



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loan-by-loan
      Modified
    Pool Insurance
     4




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Traditional
    Pool Insurance
  and/or
  Risk-sharing
    Products
             5




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Distribution
    Channels
  loan-by-loan
    Cancellation
    of Insurance
          Customers
       6




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Percent ofRevenues forthe YearEndedDecember 31,Customer

2007

2006American Home Mortgage


22
%


11
%Wells Fargo Home Mortgage, Inc.


13
%


17
%Federal National Mortgage Association


10
%


less than 10
%Countrywide Credit Industries, Inc


less than 10
%


11
%   Sales
    Contract
    Underwriting
  ® ® ®
  Competition
    and Market Share
   7




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Underwriting
    Practices
      Risk
    Management Approach
    Mortgage Lender.
 8




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Purpose and Type of Loan.
  
    We believe that an important determinant of claim incidence is
    the relative amount of borrowers equity in the home. For
    the industry as a whole, historical evidence indicates that, in
    general, claim incidence on loans with a higher LTV ratio is
    greater than a loan with a lower LTV ratio, all else being
    equal. Loans with an LTV ratio greater than 95% are offered
    primarily to low and moderate-income borrowers. These loans have
    often attracted borrowers with weaker credit histories,
    generally resulting in higher loss ratios. The State of Illinois
    Division of Insurance, as well as the insurance departments of
    several other states, permits mortgage insurers to write
    coverage on loans with LTV ratios in excess of 97% and, in
    certain instances, up to 103%.
    Another risk factor we monitor is whether the mortgage loan has
    a fixed or adjustable interest rate and the amortization
    schedule of the mortgage loan. We write policies on adjustable
    rate mortgages (ARMs) that are positively
    amortizing. Payments on these loans are adjusted periodically
    with interest rate movements. Many of the ARMs have a fixed rate
    for a stated period of time (some of which are significantly
    below then-existing market rates and are sometimes referred to
    as teaser rates), and most of those included in our recent
    production have not yet had interest rate-related payment
    adjustments. These ARMs that are still in the fixed rate term of
    their contract may have a heightened propensity to default
    because of possible payment shocks due to interest
    rate increases, especially in a period of increasing interest
    rates and declining housing prices. We also insure a small
    percentage of interest-only mortgages, a variation of an ARM,
    where the borrower pays only the interest due on a mortgage for
    a specified period of time, usually five to ten years, after
    which the loan payment increases to include principal payments.
    These interest-only loans may also be subject to a larger
    percentage of future defaults than fixed rate loans because of
    the same payment shocks due to the expiration of the initial
    period of interest-only payments, especially in a period of
    increasing interest rates and declining housing prices. We have
    accepted ARMs with potential negative amortization
    under certain conditions from approved lenders. ARMs with
    potential negative amortization include pay option
    ARMs, which we define as those that provide a fixed period of
    time for which the borrower has the option to pay monthly
    payments that are less than the interest accrued for those
    months. If the borrower elects this option, the LTV increases on
    the loan. Because the LTV can increase on a pay option ARM,
    these types of loans may present more risk to a mortgage insurer
    than traditional positive amortizing loans. We classify all
    loans with adjustable interest rates as ARMs, including those
    for which the interest rate is fixed for a certain period of
    time. We do not believe that we have sufficient default and
    claim data under distressed economic conditions to give
    assurances of the future performance of ARM products. These
    types of loans, which do not have sufficient historical data,
    are charged a higher premium.
    We believe that
    15-year
    mortgages present a lower level of risk than
    30-year
    mortgages, primarily as a result of the faster amortization and
    the more rapid accumulation of borrower equity in the property.
    Accordingly, we charge lower premium rates on these loans than
    on comparable
    30-year
    mortgages.
    We believe that the claim incidence for refinance loans is
    higher than that of purchase loans. Refinance loans may either
    be a rate-term refinance, in which case the loan is refinanced
    in order to receive a different interest rate or amortization
    term, or a cash-out refinance, in which case the loan is
    refinanced so that the borrower may withdraw equity. We believe
    a cash-out refinance has a higher claims incidence than a
    rate-term refinance.
    We believe that loans with less than full underwriting
    documentation have a higher claims incidence than those with
    full underwriting documentation. We accept loan applications
    with less than full documentation. Underwriting documentation
    includes documents to verify a borrowers income, assets
    and/or
    employment. We classify loans that have been underwritten with
    reduced or no documentation and where the borrower has a FICO
    score greater than 619 as Alt-A loans. We also have a small
    amount of loans underwritten with reduced or no documentation
    and where the borrower has a FICO score less than 619. 9




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
    We believe that the type of property securing the insured loan
    also affects the risk of claim. In our opinion, loans on
    single-family detached housing are subject to less risk of claim
    incidence than loans on other types of properties. We believe
    that attached housing types, particularly condominiums and
    cooperatives, are a higher risk because, in most areas,
    condominiums and cooperatives tend to be more susceptible to
    downward fluctuations in value than single-family detached
    dwellings in the same market.
    We believe that loans on non-owner occupied properties represent
    a substantially higher risk of claim incidence and are subject
    to greater value declines than loans on primary homes. We insure
    loans on properties not occupied by the owner (generally second
    homes or rental homes) as a normal part of our business from our
    existing customers.
    Historical evidence indicates that higher-priced properties
    experience wider fluctuations in value than moderately priced
    residences. These fluctuations exist primarily because there is
    a smaller pool of qualified buyers for higher-priced homes,
    which, in turn reduces the likelihood of achieving a quick sale
    at fair market value when necessary to avoid a default.  Individual Loan and Borrower.
  Geographic Selection of Risk.
  Underwriting
    Process for Our Flow Distribution Channel
      agreed-upon
   10




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Underwriting
    Process for Our Structured Bulk Distribution
    Channel
  loan-by-loan ®
    Other
    Risk Management
    Financial
    Strength Rating
   11




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12




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Reinsurance
            Defaults
    and Claims
  Defaults
     13




---



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Claims
          deed-in-lieu
 14




---



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Loss
    Mitigation
  deeds-in-lieu
  Loss
    Reserves
    Direct
    Risk in Force
   15




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Geographic
    Dispersion
    Top Ten States



Top Ten MSAsCalifornia


14.5
%

Phoenix/Mesa, AZ


4.1
%Florida


11.4
%

Chicago, IL


3.6
%Texas


6.4
%

Riverside/San Bernardino, CA


2.5
%Arizona


5.3
%

Los Angeles/Long Beach, CA


2.5
%Illinois


4.0
%

Las Vegas, NV


2.4
%North Carolina


3.8
%

Atlanta, GA


2.4
%Georgia


3.5
%

Denver, CO


1.7
%Virginia


3.3
%

Houston, TX


1.7
%Colorado


3.3
%

Orlando, FL


1.6
%New Jersey


3.0
%

Arlington/Fredericksburg, VA


1.6
%Total


58.5
%

Total


24.1
%       Investment
    Portfolio
    Regulation
  Direct
    Regulation
     16




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and/or
      12-month
         17




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18




---



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30-year
        Indirect
    Regulation
     19




---



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30 percent OFHEO-directed
     20




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Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, www.triadguaranty.com www.sec.gov (800) 732-0330.
  Employees
    Executive
    Officers
    Name

Position

AgeMark K. Tonnesen

President, Chief Executive Officer, and Director of the Company
    and Triad


56Gregory J. McKenzie, Jr.

President and Chief Executive Officer of Triad Guaranty
    Insurance Corporation Canada


52Kenneth C. Foster

Executive Vice President, Structured Transactions and Business
    Development


59R. Bruce Van Fleet, III

Executive Vice President, Sales and Marketing


56Steven J. Haferman

Senior Vice President, Risk Management and Information
    Technology and Director of Triad


46Kenneth W. Jones

Senior Vice President and Chief Financial Officer of the Company
    and Triad and Director of Triad


50Earl F. Wall

Senior Vice President, Secretary, and General Counsel of the
    Company and Triad and Director of Triad


50   Mark K. Tonnesen
  Gregory J. McKenzie
  Kenneth C. Foster
 21




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R. Bruce Van Fleet
  Stephen J. Haferman
  Kenneth W. Jones
  Earl F. Wall
   Item 1A.  Risk
    Factors  Form 10-K.
  Risks
    Related to Capital, Rating Agencies and Regulatory
    Concerns
  We believe our level of capital is inadequate to support our
    current ratings and to continue to satisfy applicable regulatory
    requirements. If our current ratings are downgraded or we
    violate regulatory requirements, absent the receipt of waivers
    from the GSEs and insurance regulators, we would not be able to
    write new insurance and would be limited to servicing our
    remaining book of business.
  risk-in-force
 22




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##### Table of Contents




    One or more rating agencies would likely downgrade our ratings,
    which could limit or eliminate our ability to conduct business
    with lenders, including those who sell their mortgages to the
    GSEs. Moreover, if we are downgraded, the GSEs would have the
    right to require lenders to cancel our remaining insurance
    in-force on a selective basis and substitute the cancelled
    policies with new policies written by another mortgage insurer.
    Our risk-to-capital ratio would exceed applicable insurance
    regulatory limits, which could cause the Illinois Department of
    Insurance or other state insurance regulatory authorities to
    suspend or limit our ability to write new mortgage insurance
    policies.
    If we were unable to continue writing new business, we would
    seek to implement a plan to run-off Triad. Under
    this plan, we would continue to collect premiums on our
    remaining policies, service these policies and settle claims
    under them. We would not write new policies. In addition, we
    would, to the extent of available funds, pay amounts owed to our
    creditors. Only funds remaining after satisfaction of these
    obligations, if any, would be available for distribution to our
    stockholders.    If we implement a run-off plan and our business is limited to
    servicing our remaining book of in-force insurance, we face
    additional regulatory and operating risks that could reduce or
    eliminate the market value of our common stock.
    
    Any liquidation or run-off plan would be subject to approval by
    the Illinois Department of Insurance and other state insurance
    regulatory authorities, whose focus would be on the protection
    of policyholders and not our stockholders. These authorities
    could impose significant restrictions on our operations,
    including more stringent financial reporting obligations and
    restrictions on the movement of funds from Triad to the holding
    company. Restrictions on the movement of funds to the holding
    company could adversely affect our ability to pay operating
    expenses and service our debt obligations.
    In run-off, we would likely be unable to pay dividends to our
    stockholders until all claims of policyholders and other
    creditors have been satisfied or there are adequate funds, in
    the view of applicable insurance regulatory authorities, to make
    appropriate provisions for the satisfaction of such obligations.
    It could take many years before it would be possible to
    determine whether there are any funds available for distribution
    to stockholders and no assurance can be given that any such
    funds will be available.
    If our actual claims and losses suggested that Triad were, or
    would become, insolvent, Triad would likely be placed in
    delinquency proceedings by the Illinois Department of Insurance.
    If Triad were placed in delinquency proceedings, it is unlikely
    that any funds would ever be available for distribution to
    stockholders. 23




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
    If Triad were placed in delinquency proceedings by the Illinois
    Department of Insurance or if we were unable to pay our
    indebtedness or other obligations when due, we could be forced
    to seek protection from creditors under Chapter 11 of the
    United States Bankruptcy Code.
    During run-off, the GSEs and our lender customers could have
    rights to transfer our remaining insurance in-force to other
    mortgage insurers on a selective basis, which could have a
    material adverse effect on our financial condition and results
    of operations.
    During run-off, we would need to substantially reduce our
    general and administrative and operating expenses by, among
    other things, substantially reducing our employee headcount in
    order to conserve our financial resources. In addition, we might
    have difficulty retaining certain essential employees. The loss
    of certain employees could have an adverse effect on our ability
    to implement a successful run-off plan, increasing the
    possibility that we would ultimately be placed in delinquency
    proceedings.
    If, as a result of a sustained low valuation in the market price
    for our common stock, we failed to satisfy applicable NASDAQ
    listing requirements, our common stock would be delisted. In
    that case, trading would be available only in over-the-counter
    markets and the liquidity of our shares would be adversely
    affected.  If further negative rating agency actions result in our
    inability to qualify as a Type 1 insurer under existing and
    proposed Fannie Mae guidelines, or as a Type I insurer under
    existing and proposed Freddie Mac guidelines, effectively we
    would be unable to write new business.
        AA-
  If our risk-to-capital ratio continues to increase, we could
    face adverse regulatory and rating agency action and be in
    violation of covenants in our credit agreements, which would
    adversely impact our ability to write new business.
   24




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If we fail to meet the various minimum required levels or
    maintain designated financial ratios detailed in the regulations
    of the states in which we write business, we could be declared
    to be in a hazardous financial condition, which could ultimately
    lead to restricting future business in those states.
    Changes in the business practices or legislation relating to
    Fannie Mae and Freddie Mac could significantly impact our
    business.
        Legislation and regulatory changes, including changes
    impacting the GSEs, could significantly affect our business and
    could reduce demand for private mortgage insurance.
   25




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Risks
    Related to Economic Conditions
  If deteriorating economic conditions alter the frequency and
    severity patterns utilized in our estimates for reserves for
    losses, we may be required to take additional charges to results
    of operations.
       26




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Consistent with industry practice, we provide reserves only
    for loans in default that have been reported to us rather than
    on our estimate of the ultimate loss. As such, our results of
    operations in certain periods could be disproportionately
    affected by the timing of reported defaults.
    During 2007 the United States housing market experienced a
    significant amount of home price depreciation, which had a
    direct negative impact on our loss reserves and paid claims
    during 2007. If home prices continue to decline on a more
    significant and larger geographic basis than experienced in
    2007, we may incur a higher level of losses from paid claims and
    also be required to increase our loss reserves.
  ©
  Because a significant portion of our business is sensitive to
    interest rates, a large increase in rates would cause higher
    monthly mortgage payments for borrowers that could potentially
    lead to a greater number of defaults, which would adversely
    impact our business.
   27




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##### Table of Contents



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 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 significantly impact negatively our
    financial performance.
    We experienced a significant increase in reported defaults
    and paid claims during 2007. If the pace of declining home
    prices and ongoing credit problems in the mortgage marketplace
    continues or remains unsettled, we anticipate an increased
    number of defaults and paid claims, which would have a negative
    impact on our results of operations.
      If the facts and estimates underlying the assumptions that we
    utilized at December 31, 2007, to determine both if a
    premium deficiency reserve is necessary or to ensure that the
    DAC is recoverable against future
 28




---



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profits change, we will need to adjust those assumptions in
    the future, which could result in the impairment of part or all
    of the DAC asset and require the establishment of a premium
    deficiency reserve, which would have a significant immediate
    adverse impact on results of operations.
        If we have an extended period of low mortgage interest rates,
    it could lead to increased refinancings that would have a
    negative impact on persistency, which could lead to reduced
    insurance in force and ultimately to reduced revenues.
    Risks
    Related to Products
  The premiums we charge for mortgage insurance on non-prime
    loans, pay option ARMs and Alt-A loans may not be adequate to
    compensate for future losses from these products, especially
    under distressed conditions.
   29




---



##### Table of Contents



A growing 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 periods of declining home prices.
    Risks
    Related to Operations
  Although we were successful in reducing our concentrations
    during 2007, our business remains concentrated among relatively
    few major lenders and our operating results could decline if we
    lose a significant customer.
    Our revenues and profits could decline if we lose market
    share as a result of industry competition or if our competitive
    position suffers as a result of our inability to introduce and
    successfully market new products and programs.
      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.
   30




---



##### Table of Contents



Our loss experience is likely to increase as our policies
    continue to age.
    Our revenues and DAC amortization depend on the renewal of
    policies that may terminate or fail to renew with Triad.
    Our delegated underwriting program may subject our mortgage
    insurance business to unanticipated claims.
    If we fail to properly underwrite mortgage loans when we
    provide contract underwriting services, we may be required to
    provide monetary and other remedies to the customer.
   31




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If the operating subsidiary, Triad, is prohibited from making
    interest payments on its $25 million surplus note to the
    holding company, then the holding company could be unable to
    make the required interest payments on its $35 million
    long-term debt outstanding.
    If many of our lender partners for which we have entered into
    risk-sharing agreements, such as captive reinsurance treaties,
    continue under financial stress for an extended period of time,
    then the ability of these lenders to meet their financial
    obligations under the captive reinsurance treaties may be
    limited to the trust balances maintained within the reinsurance
    structures, which could have an adverse impact on future results
    of operations.
    If we are unsuccessful in our litigation with a bankrupt
    former lender over our ability to rescind or deny coverage for
    certain loans due to program violations or fraud, this could
    have an adverse impact on future results of operations.
   32




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If the financial strength ratings of the financial guarantors
    that enhance a significant portion of our investment portfolio
    are lowered, that could limit the ability to sell affected bonds
    and could be indicative of a permanent impairment, which could
    have an adverse impact on our future results of operations.
    If the lenders are unwilling or unable to continue our
    relationship going forward due to recent guideline changes and
    limitations imposed by us during the fourth quarter of 2007,
    then our future production could suffer and it could have a
    negative impact on future revenue and results of operations.
    If we cannot reduce operating costs to meet the anticipated
    reduced production and in force amounts, then we may be unable
    to compete effectively with other mortgage insurers.
    Loan servicers have recently 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 going to claim
    status could increase.
  and/or
 33




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If we fail to obtain additional capital resources or if
    losses continue for an extended period of time and the outlook
    for mortgage insurers remains uncertain, then we may be unable
    to retain key personnel from moving to other industries that may
    appear to offer a more promising outlook.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        back-up
  Item 3.
    Legal
    Proceedings      Item 4.
    Submission
    of Matters to a Vote of Security Holders   34




---



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PART II  Item 5.Market
    for Registrants Common Stock, Related Stockholder Matters
    and Issuer Purchases of Equity Securities
  Market information
  ®
  2007

2006High

Low

High

LowFirst Quarter

$
58.62


$
39.31


$
47.25


$
41.50Second Quarter

$
47.35


$
38.45


$
57.87


$
45.50Third Quarter

$
41.05


$
14.84


$
53.43


$
45.20Fourth Quarter

$
20.63


$
5.50


$
57.66


$
48.91   Holders
    Dividends
    Issuer purchases of equity securities and unregistered sales
    of equity securities
   35




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Item 6.
    Selected
    Financial Data  2007


2006


2005


2004


2003(Dollars in thousands, except per share data)Income Statement Data(for period ended):Premiums written:Direct

$
339,007


$
256,706


$
207,260


$
176,696


$
154,046Ceded


(55,784
)


(46,140
)


(40,644
)


(35,365
)


(27,310
)$
283,223


$
210,566


$
166,616


$
141,331


$
126,736Earned premiums

$
278,900


$
210,856


$
168,997


$
140,992


$
119,732Net investment income


32,936



26,696



22,998



19,754



17,082Net realized gains (losses)


(3,049
)


1,584



36



504



3,029Other income


8



8



15



16



24Total revenues


308,795



239,144



192,046



161,266



139,867Net losses and loss adjustment expenses


372,939



94,227



66,855



35,864



23,833Interest expense on debt


4,375



2,774



2,773



2,772



2,772Amortization of deferred acquisition cost


18,497



16,268



14,902



14,256



18,112Other operating expenses (net of acquisition cost deferred)


43,628



35,556



29,610



26,483



22,776(Loss) income before income taxes (benefit)


(130,644
)


90,319



77,906



81,891



72,374Income taxes (benefit)


(53,186
)


24,684



21,093



23,474



21,283Net (loss) income

$
(77,458
)

$
65,635


$
56,813


$
58,417


$
51,091Basic (loss) earnings per share

$
(5.22
)

$
4.44


$
3.87


$
4.04


$
3.57Diluted (loss) earnings per share

$
(5.22
)

$
4.40


$
3.84


$
3.98


$
3.52Weighted average common and common share equivalents outstandingBasic


14,829,205



14,769,859



14,691,478



14,458,453



14,322,216Diluted


14,829,205



14,912,519



14,808,387



14,681,228



14,509,538Balance Sheet Data(at year end):Total assets

$
1,132,853


$
895,631


$
767,503


$
672,035


$
575,579Total invested assets

$
784,539


$
607,312


$
547,019


$
476,913


$
399,571Reserve for losses and loss adjustment expenses

$
359,939


$
84,352


$
51,074


$
34,042


$
27,186Unearned premiums

$
17,793


$
13,193


$
13,494


$
15,942


$
15,630Revolving line of credit

$
80,000


$



$



$



$
Long-term debt

$
34,519


$
34,510


$
34,501


$
34,493


$
34,486Stockholders equity

$
498,851


$
570,224


$
499,191


$
437,343


$
369,930Statutory Ratios(1):Loss ratio


133.9
%


44.7
%


39.6
%


25.4
%


19.9
%Expense ratio


19.7
%


23.4
%


25.2
%


29.4
%


33.0
%Combined ratio


153.6
%


68.1
%


64.8
%


54.8
%


52.9
%GAAP Ratios:Loss ratio


133.7
%


44.7
%


39.6
%


25.4
%


19.9
%Expense ratio


21.9
%


24.6
%


26.7
%


28.8
%


32.3
%Combined ratio


155.6
%


69.3
%


66.3
%


54.2
%


52.2
%Other Statutory Data(dollars in millions)(1):Direct insurance in force

$
68,228


$
56,828


$
44,407


$
36,827


$
31,748Direct risk in force (gross)

$
12,937


$
9,441


$
8,016


$
7,627


$
7,024Risk-to-capital


20.5:1



12.5:1



12.6:1



14.0:1



15.3:1     (1)
    
    Based on statutory accounting practices and derived from
    combined statutory financial statements of Triad. 36




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations      Overview
  loan-by-loan
       37




---



##### Table of Contents



12-month 12-month
  Consolidated
    Results of Operations
    %Change

%Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands, except per share data)Earned premiums

$
278,900


$
210,856


$
168,997



32.3
%


24.8
%Net losses and loss adjustment expenses


372,939



94,227



66,855



295.8



40.9Other operating expenses


43,628



35,556



29,610



22.7



20.1Net (loss) income


(77,458
)


65,635



56,813



(218.0
)


15.5Diluted (loss) earnings per share

$
(5.22
)

$
4.40


$
3.84



(218.7
)%


14.6
%        38




---



##### Table of Contents



start-up
      Production
    % Change

%Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in millions)Primary insurance written:Flow

$
15,861


$
10,962


$
10,456



44.7
%


4.8
%Structured bulk


3,723



1,126



32



230.6



3,418.8Total Primary insurance written

$
19,584


$
12,088


$
10,488



62.0



15.3Modified Pool insurance written


3,331



12,672



10,681



(73.7
)


18.6Total insurance written

$
22,915


$
24,760


$
21,169



(7.5
)%


17.0
%     
    American Home Mortgage Corp. (AHM) was our second
    largest customer for 2007, contributing $3.2 billion, or
    21% of our total Primary flow NIW. AHM filed for protection
    under Chapter 11 of the U.S. Bankruptcy Code during
    the third quarter of 2007 and, as a result, provided extremely
    limited production during the second half of 2007. We do not
    anticipate any further production from AHM. The AHM bankruptcy,
    coupled with contractions in personnel and a reduction in
    production by two of our other large lender customers due to the
    unsettled nature of the mortgage marketplace, negatively
    impacted production for the second half of 2007. We expect that
    we will see further reductions in production in 2008.
    At December 31, 2007, our risk to capital ratio was
    20.5-to-1 compared to 12.5-to-1 at December 31, 2006. The
    maximum risk to capital ratio permitted by most states is
    generally 25.0-to-1. In addition, we are subject to a maximum
    risk to capital ratio of 22.1-to-1 under our $80 million
    credit facility. Our risk to capital ratio has been increasing
    over the last several quarters, partially as the result of
    operating losses during the third and fourth quarters of 2007.
    In order to manage our risk to capital ratio in this
    environment, we are carefully monitoring the writing of new
    business and allocating our capital against what we believe to
    be the most promising opportunities. This allocation of capital
    is expected to further limit the amount of future production.
    We discontinued a special lender-paid program at the end of the
    second quarter that had been responsible for approximately
    $600 million of NIW per quarter for each of the first two
    quarters of 2007 and the last quarter of 2006. 39




---



##### Table of Contents




    For the twelve months ended December 31, 2007, our exposure
    to loans with LTVs of greater than 95% represented 32.6% of
    Primary NIW. As noted above, we are reducing the risk in our
    portfolio through tightened underwriting guidelines and are
    limiting our exposure to loans with LTVs of greater than 95%.
    Our focus on quality through tightened underwriting guidelines
    has resulted, and we expect will continue to result, in the
    elimination of certain mortgage lenders with which we had
    historically done business and a reduction in volume from other
    lenders with which we continue to do business.        Market Share by Channel

2007

2006

2005Flow channel


5.6
%


6.3
%


5.7
%Structured bulk channel


9.7
%


14.5
%


11.5
%Total


6.4
%


9.1
%


7.5
%          40




---



##### Table of Contents



Credit Quality of Primary NIW

2007

2006

2005Prime


67.5
%


68.4
%


76.1
%Alt-A


29.2
%


29.2
%


18.3
%A-Minus


2.9
%


2.1
%


4.3
%Sub Prime


0.4
%


0.3
%


1.3
%Total


100.0
%


100.0
%


100.0
%     Loan Type of Primary NIW

2007

2006

2005Fixed


64.8
%


58.1
%


62.9
%ARM (positive amortization)


19.4
%


14.3
%


25.0
%ARM (potential negative amortization)


15.8
%


27.6
%


12.1
%Total


100.0
%


100.0
%


100.0
%       Loan to Value of Primary NIW

2007

2006

2005Greater than 95%


32.6
%


15.5
%


12.4
%90.01% to 95.00%


23.8
%


23.9
%


35.5
%90.00% and below


43.6
%


60.6
%


52.1
%Total


100.0
%


100.0
%


100.0
%    41




---



##### Table of Contents



Insurance
    and Risk in Force
    % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in millions)Primary insurance:Flow primary insurance

$
41,840


$
32,779


$
29,364



27.6
%


11.6
%Structured bulk insurance


4,525



1,330



428



240.2



210.7Total Primary insurance


46,365



34,109



29,792



35.9



14.5Modified pool insurance


21,863



22,719



14,615



(3.8
)


55.4Total insurance

$
68,228


$
56,828


$
44,407



20.1
%


28.0
%       
    A decline in the percentage of business defined as prime credit
    quality;
    An increase in the percentage of Alt-A business;
    An increase in Primary LTV greater than 95%;
    An increase in PNAM loan types;
    An increase in condominium property types;
    A decline in Primary residence occupancy status;
    A growing percentage of loans in excess of $250,000;
    A greater concentration of risk in distressed market
    states; and
    The presence of multiple risk factors on a single insured loan. 42




---



##### Table of Contents



Risk in
    Force(1)
  Primary


Modified Pool2007


2006


2005


2007


2006


2005(Dollars in millions)Direct Risk in Force

$
12,136


$
8,652


$
7,471


$
913


$
890


$
616Net Risk In Force


11,166



7,824



6,767



801



789



545Credit Quality:Prime


74.4
%


80.2
%


84.2
%


27.9
%


30.5
%


32.8
%Alt-A


21.9



15.7



10.8



71.3



68.5



65.9A-Minus


3.2



3.5



4.2



0.7



0.8



1.1Sub Prime


0.5



0.6



0.8



0.1



0.2



0.2Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%LTV:Greater than 95%


25.7
%


16.6
%


14.3
%



%



%



%90.01% to 95.00%


32.5



37.1



41.9



0.3



0.3



0.590.00% and below


41.8



46.3



43.8



99.7



99.7



99.5Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Loan Type:Fixed


64.7
%


68.9
%


73.3
%


26.2
%


30.8
%


39.9
%Interest Only


10.7



5.9



3.0



23.3



24.5



26.7ARM (amortizing) fixed period 5 years or greater


9.4



9.4



11.9



31.4



27.2



25.3ARM (amortizing) fixed period less than 5 years


2.4



4.5



7.8



6.1



4.5



8.1ARM (potential negative amortization)


12.8



11.3



4.0



13.0



13.0



Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Property Type:Condominium


10.4
%


9.6
%


7.8
%


9.4
%


8.0
%


5.9
%Other (principally single-family detached)


89.6



90.4



92.2



90.6



92.0



94.1Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Occupancy Status:Primary residence


87.7
%


89.4
%


91.9
%


73.5
%


73.7
%


74.2
%Secondary home


7.9



7.4



4.6



6.2



6.2



5.7Non-owner occupied


4.4



3.2



3.5



20.3



20.1



20.1Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Mortgage Amount:$0  $50,000


0.9
%


1.2
%


1.5
%


0.5
%


0.6
%


0.8
%$51,000  $100,000


9.7



13.2



16.1



5.4



6.0



8.1$100,001 -$250,000


52.0



57.1



63.0



45.6



47.4



54.9$250,001 -$500,000


31.5



24.2



18.3



42.1



39.9



35.6Over $500,000


5.9



4.3



1.1



6.4



6.1



0.6Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%Market Status:Distressed market states (AZ, CA, FL, NV)


27.0
%


16.3
%


11.6
%


47.9
%


46.5
%


27.3
%Non-distressed market states


73.0



83.7



88.4



52.1



53.5



72.7Total


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%


100.0
%     (1)
    
    Percentages represent distribution of direct risk in force on a
    per policy basis and do not account for applicable stop-loss
    amounts or deductibles on Modified Pool. 43




---



##### Table of Contents



2007


2006


2005Primary


Modified Pool *


Primary


Modified Pool *


Primary


Modified Pool *Direct





Direct





Direct





Direct





Direct





DirectRisk in





Risk in





Risk in





Risk in





Risk in





Risk inForce


Percent


Force


Percent


Force


Percent


Force


Percent


Force


Percent


Force


Percent(Dollars in millions)2002 and before

$
667.5



5.5
%

$
41.7



5.2
%

$
856.5



9.9
%

$
53.6



6.8
%

$
1,158.0



15.5
%

$
76.9



14.1
%2003


1,165.1



9.6



112.1



14.0



1,479.5



17.1



121.5



15.4



1,987.3



26.6



123.2



22.62004


1,116.5



9.2



130.6



16.3



1,453.5



16.8



131.0



16.6



1,949.9



26.1



131.3



24.12005


1,638.4



13.5



239.5



29.9



2,024.6



23.4



239.9



30.4



2,375.8



31.8



213.6



39.22006


2,718.5



22.4



247.5



30.9



2,837.9



32.8



243.0



30.8















2007


4,830.1



39.8



29.6



3.7































Total

$
12,136.0



100.0
%

$
801.0



100.0
%

$
8,652.0



100.0
%

$
789.0



100.0
%

$
7,471.0



100.0
%

$
545.0



100.0
%     *
    
    For Modified Pool, the Direct Risk in Force is calculated
    utilizing the particular stop-loss limits and deductibles within
    each specific structure.       44




---



##### Table of Contents



lender-by-lender
  Revenues
    % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Direct premium written

$
339,007


$
256,706


$
207,260



32.1
%


23.9
%Ceded premium written


(55,784
)


(46,140
)


(40,644
)


20.9



13.5Net premium written


283,223



210,566



166,616



34.5



26.4Change in unearned premiums


(4,323
)


290



2,381



n/a



(87.8
)Earned premiums

$
278,900


$
210,856


$
168,997



32.3
%


24.8
%Net investment income

$
32,936


$
26,696


$
22,998



23.4
%


16.1
%Total revenues

$
308,795


$
239,144


$
192,046



29.1
%


24.5
%            45




---



##### Table of Contents



Losses
    and Expenses
    % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Net losses and loss adjustment expenses

$
372,939


$
94,227


$
66,855



295.8
%


40.9
%Amortization of deferred policy acquisition costs

$
18,497


$
16,268


$
14,902



13.7
%


9.2
%Other operating expenses (net of acquisition costs deferred)

$
43,628


$
35,556


$
29,610



22.7
%


20.1
%Loss ratio


133.7
%


44.7
%


39.6
%Expense ratio


21.9
%


24.6
%


26.7
%Combined ratio


155.6
%


69.3
%


66.3
%         % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Paid claims :Primary insurance

$
83,204


$
54,923


$
44,369



51.5
%


23.8
%Modified Pool insurance


17,408



4,104



4,457



324.2



(7.9
)Total

$
100,612


$
59,027


$
48,826



70.5
%


20.9
%Number of claims paid:Primary insurance


2,341



2,073



1,671



12.9
%


24.1
%Modified Pool insurance


398



204



217



95.1



(6.0
)Total


2,739



2,277



1,888



20.3
%


20.6
%    46




---



##### Table of Contents



Primary



Modified PoolAverage

Average

Average

AverageVintage Year

Loan Size

Insured Risk

Loan Size

Insured Risk2002 and Prior

$
106,003


$
26,809






$
80,387


$
26,1052003


119,668



28,709







145,348



42,8562004


132,591



35,042







150,444



44,6102005


156,975



40,821







178,946



58,1982006


207,324



53,534







259,678



69,2862007


208,429



56,509







270,932



79,163Overall Average

$
169,340


$
44,324






$
208,004


$
60,875     % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Average Severity:Primary insurance

$
35,500


$
26,500


$
26,600



34.0
%


(0.4
)%Modified Pool insurance

$
43,700


$
20,100


$
20,500



117.4
%


(2.0
)%Total

$
36,700


$
25,900


$
25,900



41.7
%



%      47




---



##### Table of Contents



Cumulative Paid Loss Ratios as of December 31Certificate Year

2007

2006

20051996


14.5
%


14.5
%


13.9
%1997


10.2



10.0



9.91998


6.8



6.5



6.41999


9.9



9.7



9.02000


35.4



34.7



32.02001


31.0



29.0



23.72002


31.9



29.2



22.42003


16.7



13.0



7.82004


17.5



10.2



2.02005


21.6



4.2



2006


11.7



0.1



2007


0.1







       % Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Primary insurance:Reserves for reported defaults

$
251,316


$
65,417


$
44,198



284.2
%


48.0
%Reserves for defaults incurred but not reported


40,691



5,676



4,536



616.9



25.1Total Primary insurance


292,007



71,093



48,734



310.7
%


45.9
%Modified Pool insurance:Reserves for reported defaults


54,876



11,477



1,836



378.1
%


525.1
%Reserves for defaults incurred but not reported


8,340



773



403



978.9



91.8Total Modified Pool insurance


63,216



12,250



2,239



416.0
%


447.1
%Reserve for loss adjustment expenses


4,716



1,009



101



367.4
%


899.0
%Total reserves for losses and loss adjustment expenses

$
359,939


$
84,352


$
51,074



326.7
%


65.2
%     Year Ended December 31,

% Change

% Change2007

2006

2005

2007 vs. 2006

2006 vs. 2005(Dollars in thousands)Net increase in reserve for losses and loss adjustment expenses

$
275,587


$
33,278


$
17,032



728.1
%


95.4
%  48




---



##### Table of Contents



December 31,


December 31,


December 31,2007


2006


2005(Dollars in thousands)Risk In Force:California

$
1,962,700


$
1,469,876


$
769,469Florida


1,688,314



1,300,897



869,799Arizona


764,685



577,950



439,476Nevada


408,752



299,130



200,154Total Distressed Market States

$
4,824,451


$
3,647,853


$
2,278,898Total Risk in Force

$
15,030,500


$
11,890,841


$
9,556,343% of Distressed Market States


32.1
%


30.7
%


23.8
%Risk in Default:California

$
130,321


$
17,975


$
4,620Florida


149,841



17,097



7,256Arizona


39,095



6,213



2,191Nevada


27,411



5,573



1,308Total Distressed Market States

$
346,668


$
46,858


$
15,375Total Risk in Default

$
732,087


$
258,422


$
202,675% of Distressed Market States


47.4
%


18.1
%


7.6
%Reserves:California

$
62,516


$
4,379


$
915Florida


73,055



4,218



1,743Arizona


18,517



1,363



461Nevada


13,334



1,509



317Total Distressed Market States

$
167,422


$
11,469


$
3,436Total Reserves

$
359,939


$
84,352


$
51,074% of Distressed Market States


46.5
%


13.6
%


6.7
%  49




---



##### Table of Contents



December 31,

December 31,

December 31,2007

2006

2005(Dollars in thousands)Risk on loans in default excluding loans subject to deductibles

$
732,087


$
258,422


$
220,030Reserves as a percentage of risk in default


49.2
%


32.6
%


23.2
%       December 31,

December 31,

December 31,2007

2006

2005(Dollars in thousands)Total business:Number of insured loans in force


378,907



338,086



302,488With deductibles


59,592



61,483



49,260Without deductibles


319,315



276,603



253,228Number of loans in default


16,821



8,566



7,753With deductibles


4,072



1,898



1,389Without deductibles


12,749



6,668



6,364Percentage of loans in default (default rate)


4.44
%


2.53
%


2.56
%Percentage of loans in default excluding deductibles


3.99
%


2.41
%


2.51
%Primary insurance:Number of insured loans in force


273,798



225,531



217,397Number of loans in default


10,419



5,565



5,617Percentage of loans in default


3.81
%


2.47
%


2.58
%Modified Pool insurance:Number of insured loans in force


105,109



112,555



85,091With deductibles


59,569



61,456



49,233Without deductibles


45,540



51,099



35,858Number of loans in default


6,402



3,001



2,136With deductibles


4,072



1,897



1,389Without deductibles


2,330



1,104



747Percentage of loans in default


6.09
%


2.67
%


2.51
%Percentage of loans in default excluding deductibles


5.12
%


2.16
%


2.08
%Primary Alt-A business (included in above):Number of insured loans in force


35,980



22,385



16,378Number of loans in default


3,102



814



590Percentage of loans in default


8.62
%


3.64
%


3.60
%    50




---



##### Table of Contents



51




---



##### Table of Contents



Significant
    Customers
          Financial
    Position
   52




---



##### Table of Contents



Deferred
    Policy Acquisition Costs
      2007


2006


2005(Dollars in thousands)Balance  beginning of period

$
35,143


$
33,684


$
32,453Costs capitalized


19,597



17,727



16,133Amortization  normal


(18,140
)


(15,990
)


(13,191
)Amortization  dynamic adjustment


(357
)


(278
)


(1,711
)Total amortization

$
(18,497
)

$
(16,268
)

$
(14,902
)Balance  end of period

$
36,243


$
35,143


$
33,684Annual Persistency


81.9
%


76.8
%


68.7
%     Prepaid
    Federal Income Taxes and Deferred Income Taxes
   53




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##### Table of Contents



Investment
    Portfolio
  Portfolio
    Description
      December 31, 2007


December 31, 2006Amount


Percent


Amount


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

$
11,762



1.5
%

$
11,842



2.0
%State and municipal bonds


673,264



85.8
%


558,131



91.9
%Corporate bonds


40,605



5.2
%


16,572



2.7
%Mortgage-backed bonds






0.0
%


49



0.0
%Total fixed maturities


725,631



92.5
%


586,594



96.6
%Equity securities


2,162



0.3
%


10,417



1.7
%Total
    available-for-sale
    securities


727,793



92.8
%


597,011



98.3
%Other investments






0.0
%


5,000



0.8
%Short-term investments


56,746



7.2
%


5,301



0.9
%$
784,539



100.0
%

$
607,312



100.0
%    54




---



##### Table of Contents



December 31, 2007Carrying

% of TotalValue

Invested Assets(Dollars in thousands)Name of Creditor/IssuerCity of New York, New York

$
7,000



0.89
%Atlanta, Georgia Airport


6,637



0.85
%State of New York


6,500



0.83
%State of Massachusetts


6,472



0.82
%State of Connecticut


6,407



0.82
%State of Pennsylvania


6,033



0.77
%Clark County, South Dakota


5,430



0.69
%State of Hawaii


5,333



0.68
%State of Indiana


5,211



0.66
%University of New Mexico


5,078



0.65
%     2007

2006

2005(Dollars in thousands)Average investments at cost or amortized cost

$
682,006


$
559,378


$
493,256Pre-tax net investment income

$
32,936


$
26,696


$
22,998Pre-tax yield


4.8
%


4.8
%


4.7
%Tax-equivalent
    yield-to-maturity


6.5
%


6.7
%


6.8Pre-tax realized investment (losses) gains

$
(3,049
)

$
1,584


$
36   yield-to-maturity
  Unrealized
    Gains and Losses
    Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairCost


Gains


Losses


Value(dollars in thousands)Fixed maturity securities:U. S. government obligations

$
11,644


$
144


$
(26
)

$
11,762State and municipal bonds


659,178



15,552



(1,466
)


673,264Corporate bonds


40,102



672



(169
)


40,605Subtotal, fixed maturities


710,924



16,368



(1,661
)


725,631Equity securities


2,520







(358
)


2,162Short term investments


56,746











56,746Total securities

$
770,190


$
16,368


$
(2,019
)

$
784,539  55




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##### Table of Contents



other-than-temporarily
  Credit
    Risk
    December 31, 2007


December 31, 2006Amount


Percent


Amount


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

$
11,762



1.6
%

$
11,842



2.0
%AAA


518,769



71.5



464,042



79.1AA


150,820



20.8



72,051



12.3A


25,774



3.6



25,054



4.3BBB


8,738



1.2



10,782



1.9BB


1,072



0.1



50



0.0CCC


5,591



0.8







CC and lower


2



0.0



279



0.0Not rated


3,103



0.4



2,494



0.4Total fixed maturities

$
725,631



100.0
%

$
586,594



100.0
%Equities:Preferred stocks:AA

$
745



34.5
%

$
1,708



16.4
%A


883



40.8



2,035



19.5BBB


534



24.7



1,132



10.92,162



100.0



4,875



46.8Common stocks










5,542



53.2Total equities

$
2,162



100.0
%

$
10,417



100.0
%    56




---



##### Table of Contents




    Length of time the fair value was below amortized cost;
    Industry factors or conditions related to a geographic area
    negatively affecting the security;
    Downgrades by a rating agency;
    Past due interest or principal payments or other violation of
    covenants; and
    Deterioration of the overall financial condition of the specific
    issuer.  other-than-temporary other-than-temporary
  other-than-temporary other-than-temporary
    other-than-temporary
  Realized
    Losses and Impairments
  other-than-temporary other-than-temporary
  Liquidity
    and Capital Resources
  
   57




---



##### Table of Contents



risk-to-capital
  risk-in-force
   58




---



##### Table of Contents



case-by-case
  paid-in-capital
 59




---



##### Table of Contents



December 31,


December 31,2007


2006(Dollars in millions)Statutory policyholders surplus

$
197.7


$
168.4Statutory contingency reserve


387.4



521.8Total

$
585.1


$
690.3     risk-to-capital risk-to-capital risk-to-capital risk-to-capital risk-to-capital
     60




---



##### Table of Contents



Off
    Balance Sheet Arrangements and Aggregate Contractual
    Obligations
        Payments Due By PeriodLess Than








More ThanContractual Obligations:

Total


1 Year


1-3 Years


3-5 Years


5 Years(Dollars in thousands)Long-term debt

$
35,000


$



$



$



$
35,000Operating leases


8,567



2,358



3,331



2,878



Loss reserves


359,939



269,954



89,985







Total

$
403,506


$
272,312


$
93,316


$
2,878


$
35,000     Market
    Risk Exposure
   61




---



##### Table of Contents



Critical
    Accounting Policies and Estimates
    Reserve
    for Losses and Loss Adjustment Expenses
    (LAE)
        Sensitivity AnalysisEffect on Pretax Income fromChanges in AssumptionsDecrease in Factors

Increase in FactorsResulting in an

Resulting in aIncrease in Pretax

(Decrease) in PretaxIncome

Income(Dollars in thousands)20% Increase (Decrease) in the Frequency FactorsUtilized in the Loss Reserve Model

$
63,178


$
(63,179
)20% Increase (Decrease) in the Severity FactorsUtilized in the Loss Reserve Model

$
71,970


$
(69,388
)20% Increase (Decrease) in Both the Frequency andSeverity Factors Utilized in the Loss Reserve Model

$
123,561


$
(146,449
)    62




---



##### Table of Contents



Investments
    other-than-temporary
  other-than-temporarily other-than-temporary
  Deferred
    Policy Acquisition Costs
     63




---



##### Table of Contents



Safe
    Harbor Statement under the Private Securities Litigation Reform
    Act of 1995
    
    if our current ratings are downgraded or we violate regulatory
    requirements, absent the receipt of waivers from the GSEs and
    insurance regulators, we would not be able to write new
    insurance and would be limited to servicing our remaining book
    of business;
    if we implement a run-off plan and our business is limited to
    servicing our remaining book of in-force insurance, we face
    additional regulatory and operating risks that could reduce or
    eliminate the market value of our common stock;
    interest rates may increase or decrease from their current
    levels;
    housing prices may increase or decrease from their current
    levels;
    ongoing credit problems in the mortgage marketplace may continue
    and cause an increased number of defaults and paid claims;
    housing transactions requiring mortgage insurance may decrease
    for many reasons, including changes in interest rates or
    economic conditions or alternative credit enhancement products;
    our market share may change as a result of changes in
    underwriting criteria or competitive products or rates;
    the amount of insurance written could be adversely affected by
    changes in federal housing legislation, including changes in the
    Federal Housing Administration loan limits and coverage
    requirements of the GSEs, Freddie Mac and Fannie Mae;
    our financial condition and competitive position could be
    affected by legislation or regulation impacting the mortgage
    guaranty industry or the GSEs, specifically, and the financial
    services industry in general;
    rating agencies may revise methodologies for determining our
    financial strength ratings and may further revise, downgrade or
    withdraw the assigned ratings at any time;
    decreases in persistency, which are affected by loan
    refinancings in periods of low interest rates, may have an
    adverse effect on results of operations;
    the amount of insurance written and the growth in insurance in
    force or risk in force, as well as our performance, may be
    adversely impacted by the competitive environment in the private
    mortgage insurance industry, including the type, structure, mix
    and pricing of our products and services and our competitors;
    if we fail to properly underwrite mortgage loans under contract
    underwriting service agreements, we may be required to assume
    the costs of repurchasing those loans;
    with consolidation occurring among mortgage lenders and our
    concentration of insurance in force generated through
    relationships with significant lender customers, our margins may
    be compressed and the loss of a significant customer or a change
    in their business practices affecting mortgage insurance may
    have an adverse effect on our results of operations;
    our performance may be impacted by changes in the performance of
    the financial markets and general economic conditions;
    economic downturns in regions where our risk is more
    concentrated, such as the distressed markets, could have a
    particularly adverse effect on our financial condition and loss
    development; 64




---



##### Table of Contents




    revisions in risk-based capital rules by the Office of Federal
    Housing Enterprise Oversight for the GSEs could severely limit
    our ability to compete against various types of credit and our
    risk-to-capital
    ratio may continue to grow, which could cause us to face adverse
    regulatory action, rating agency action or both;
    further changes in the eligibility guidelines of the GSEs could
    have an adverse effect on results of operations and our ability
    to conduct our business;
    proposed regulation by the Department of Housing and Urban
    Development to exclude packages of real estate settlement
    services, which may include any required mortgage insurance
    premium paid at closing, from the anti-referral provisions of
    the Real Estate Settlement Procedures Act could adversely affect
    our results of operations; and
    our financial and competitive position could be affected by
    regulatory activity requiring changes to mortgage industry
    business practices, such as captive reinsurance.    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.
    Controls
    and Procedures  Conclusions
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rules 13a-15(e) 15d-15(e)
  Form 10-K
 65




---



##### Table of Contents



Changes
    in Internal Control over Financial Reporting
    Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
     66




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on Internal
    Control
    over Financial Reporting
  The Board of Directors and Stockholders of Triad Guaranty
    Inc.
              
    67




---



##### 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   68




---



##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules         69




---



##### Table of Contents



SIGNATURES  st
  By:
    /s/  Mark
    K. Tonnesen   President and Chief Executive Officer
  st
  Signature

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

Chairman of the Board/s/  Mark
    K. TonnesenMark
    K. Tonnesen

President, Chief Executive Officer, and Director 
    (Principal Executive Officer)/s/  Kenneth
    W. JonesKenneth
    W. Jones

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

Vice President and Chief Accounting Officer 
    (Principal Accounting Officer)/s/  Glenn
    T. Austin, Jr.Glenn
    T. Austin, Jr.

Director/s/  Robert
    T. DavidRobert
    T. David

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

Director/s/  Richard
    S. SwansonRichard
    S. Swanson

Director/s/  David
    W. WhitehurstDavid
    W. Whitehurst

Director/s/  Henry
    G. Williamson, Jr.Henry
    G. Williamson, Jr.

Director  70




---



##### 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, 2007
  TRIAD
    GUARANTY INC.
  WINSTON-SALEM,
    NORTH CAROLINA
 71




---



##### 



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


73Consolidated Balance Sheets at December 31,
    2007 and 2006


74Consolidated Statements of Operations for each of
    the three years in the period ended December 31, 2007


75Consolidated Statements of Changes in
    Stockholders Equity for each of the three years in the
    period ended December 31, 2007


76Consolidated Statements of Cash Flows for each of
    the three years in the period ended December 31, 2007


77Notes to Consolidated Financial Statements


78Financial Statement SchedulesSchedules at and for each of the three years in the period ended
    December 31, 2007Schedule I  Summary of
    Investments  Other Than Investments in Related
    Parties


94Schedule II  Condensed Financial
    Information of Registrant


95Schedule IV  Reinsurance


100     72




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  The Board of Directors and Stockholders of Triad Guaranty
    Inc.
          
    73




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    BALANCE SHEETS  December 31,2007


2006(Dollars in thousands, except per share data)ASSETSInvested assets:Securities
    available-for-sale,
    at fair value:Fixed maturities (amortized cost: $710,924 and $568,992)

$
725,631


$
586,594Equity securities (cost: $2,520 and $9,530)


2,162



10,417Other investments






5,000Short-term investments


56,746



5,301Total invested assets


784,539



607,312Cash and cash equivalents


124,811



38,609Real estate acquired in claim settlement


10,860



10,170Accrued investment income


10,246



8,054Deferred policy acquisition costs


36,243



35,143Prepaid federal income taxes


116,008



166,908Property and equipment, at cost less accumulated depreciation
    (2007  $23,458; 2006  $21,160)


11,421



7,678Reinsurance recoverable, net


5,815



841Other assets


32,910



20,916Total assets

$
1,132,853


$
895,631LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Losses and loss adjustment expenses

$
359,939


$
84,352Unearned premiums


17,793



13,193Amounts payable to reinsurers


6,525



5,909Deferred income taxes


123,297



176,483Revolving line of credit


80,000



Long-term debt


34,519



34,510Accrued interest on debt


1,355



1,275Accrued expenses and other liabilities


10,574



9,685Total liabilities


634,002



325,407Commitments and contingencies  Notes 5 and 15Stockholders equity:Preferred stock, par value $0.01 per share 
    authorized 1,000,000shares; no shares issued and outstanding






Common stock, par value $0.01 per share  authorized
    32,000,000shares; issued and outstanding 14,920,243 shares at
    December 31,2007 and 14,856,401 shares at December 31, 2006


149



149Additional paid-in capital


109,679



104,981Accumulated other comprehensive income, net of income tax
    liabilityof $6,475 at December 31, 2007 and $6,471 at
    December 31, 2006


13,405



12,018Retained earnings


375,618



453,076Total stockholders equity


498,851



570,224Total liabilities and stockholders equity

$
1,132,853


$
895,631    74




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2007


2006


2005(Dollars in thousands, except per share data)Revenue:Premiums written:Direct

$
339,007


$
256,706


$
207,260Ceded


(55,784
)


(46,140
)


(40,644
)Net premiums written


283,223



210,566



166,616Change in unearned premiums


(4,323
)


290



2,381Earned premiums


278,900



210,856



168,997Net investment income


32,936



26,696



22,998Net realized investment gains (losses)


(3,049
)


1,584



36Other income


8



8



15308,795



239,144



192,046Losses and expenses:Net losses and loss adjustment expenses


372,939



94,227



66,855Interest expense on debt


4,375



2,774



2,773Amortization of deferred policy acquisition costs


18,497



16,268



14,902Other operating expenses (net of acquisition costs deferred)


43,628



35,556



29,610439,439



148,825



114,140(Loss) income before income taxes (benefit)


(130,644
)


90,319



77,906Income taxes (benefit):Current


(5
)


4,078



2,805Deferred


(53,181
)


20,606



18,288(53,186
)


24,684



21,093Net (loss) income

$
(77,458
)

$
65,635


$
56,813(Loss) earnings per common and common equivalent share:Basic

$
(5.22
)

$
4.44


$
3.87Diluted

$
(5.22
)

$
4.40


$
3.84Shares used in computing (loss) earnings per common and
    common equivalent share:Basic


14,829,205



14,769,859



14,691,478Diluted


14,829,205



14,912,519



14,808,387    75




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY  AccumulatedAdditional


OtherCommon


Paid-In


Comprehensive


Deferred


RetainedStock


Capital


Income


Compensation


Earnings


Total(Dollars in thousands, except per share data)Balance at January 1, 2005

$
146


$
94,852


$
13,218


$
(1,501
)

$
330,628


$
437,343Net Income


















56,813



56,813Other comprehensive income  net of tax:Change in unrealized gains on investments










(2,112
)










(2,112
)Other comprehensive income






















(2,112
)Comprehensive income






















54,701Tax effect of exercise of non-qualified stock options and
    vesting of restricted stock






2,090















2,090Net issuance of restricted stock under stock incentive plan






3,448







(3,448
)






Issuance of common stock under stock incentive plan


2



3,267















3,269Amortization of deferred compensation














1,788







1,788Balance at December 31, 2005


148



103,657



11,106



(3,161
)


387,441



499,191Net income


















65,635



65,635Other comprehensive
    income-net
    of tax Change in unrealized gains on investments










912











912Other comprehensive income






















912Comprehensive income






















66,547Adoption of FAS 123(R)






(3,161
)






3,161







Share-based compensation






3,476















3,476Tax effect of exercise of non-qualified stock options and
    vesting of restricted stock






263















263Net issuance of restricted stock under stock incentive plan


1



(1
)














Issuance of common stock under stock incentive plan






747















747Balance at December 31, 2006


149



104,981



12,018







453,076



570,224Net loss


















(77,458
)


(77,458
)Other comprehensive
    income-net
    of taxChange in unrealized gains on investments










(2,691
)










(2,691
)Foreign currency translation adjustment










4,078











4,078Other comprehensive income






















1,387Comprehensive loss






















(76,071
)Share-based compensation






3,918















3,918Tax effect of exercise of non-qualified stock options and
    vesting of restricted stock






164















164Issuance of common stock under stock incentive plan






616















616Balance at December 31, 2007

$
149


$
109,679


$
13,405


$



$
375,618


$
498,851    76




---



##### Table of Contents



TRIAD
    GUARANTY INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2007


2006


2005(Dollars in thousands)Operating activitiesNet (loss) income

$
(77,458
)

$
65,635


$
56,813Adjustments to reconcile net income to net cash provided by
    operating activities:Losses, loss adjustment expenses and unearned premium reserves


280,187



32,977



14,584Accrued expenses and other liabilities


889



1,716



1,421Amounts payable to reinsurer


616



1,099



343Accrued investment income


(2,192
)


(817
)


(1,008
)Policy acquisition costs deferred


(19,597
)


(17,727
)


(16,133
)Amortization of deferred policy acquisition costs


18,497



16,268



14,902Net realized investment losses (gains)


3,049



(1,584
)


(36
)Provision for depreciation


2,309



2,531



3,456Accretion of discount on investments


680



130



(118
)Deferred income taxes


(53,181
)


20,606



18,288Prepaid federal income taxes


50,900



(27,443
)


(20,333
)Real estate acquired in claim settlement, net of write-downs


(690
)


(4,449
)


(5,510
)Accrued interest on debt


80







Other assets


(16,968
)


(4,141
)


96Other operating activities


3,955



3,645



4,082Net cash provided by operating activities


191,076



88,446



70,847Investing activitiesSecurities
    available-for-sale:Purchases  fixed maturities


(298,992
)


(172,782
)


(130,475
)Sales  fixed maturities


155,295



116,101



35,900Maturities  fixed maturities


1,715



6,386



11,715Purchases  equities


(55
)


(4,805
)


Sales  equities


8,338



3,183



1,853Purchases of other investments






(5,000
)


Net change in short-term investments


(51,445
)


(505
)


7,724Purchases of property and equipment


(6,052
)


(2,382
)


(2,339
)Net cash used in investing activities


(191,196
)


(59,804
)


(75,622
)Financing activitiesBorrowings under revolving credit facility


80,000







Excess tax benefits from share-based compensation


175



286



Proceeds from exercise of stock options


616



747



3,269Net cash provided by financing activities


80,791



1,033



3,269Foreign currency translation adjustment on cash and cash
    equivalents


5,531







Net change in cash and cash equivalents


86,202



29,675



(1,506
)Cash and cash equivalents at beginning of period


38,609



8,934



10,440Cash and cash equivalents at end of period

$
124,811


$
38,609


$
8,934Supplemental schedule of cash flow informationCash (received) paid during the period for:Income taxes and United States Mortgage Guaranty Tax and Loss
    Bonds

$
(45,614
)

$
34,454


$
24,733Interest

$
4,286


$
2,765


$
2,765    77




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007 1.
    Accounting
    Policies  Nature
    of Business
  start-up
  Basis
    of Presentation
    Consolidation
    Use of
    Estimates
    Investments
       78




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    and Cash Equivalents
    Real
    Estate Acquired in Claim Settlement
    Deferred
    Policy Acquisition Costs
      Property
    and Equipment
    Loss
    and Loss Adjustment Expense Reserves
     79




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Reinsurance
    Income
    Taxes
       80




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Income
    Recognition
      Significant
    Customers
    Share-Based
    Compensation
      Foreign
    Currency Translation
  non-U.S. dollar
  (Loss) Earnings
    Per Share (EPS)
   81




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Comprehensive
    (Loss) Income
    2007


2006


2005(Dollars in thousands)Unrealized gains (losses) arising during the period, before taxes

$
(7,189
)

$
2,988


$
(3,213
)Income tax (expense) benefit


2,516



(1,046
)


1,124Unrealized gains (losses) arising during the period, net of taxes


(4,673
)


1,942



(2,089
)Less reclassification adjustment:(Loss) Gains realized in net income


(3,049
)


1,584



36Income tax (expense) benefit


1,067



(554
)


(13
)Reclassification adjustment for gains realized in net income


(1,982
)


1,030



23Change in unrealized gains (losses) on investments


(2,691
)


912



(2,112
)Foreign currency translation adjustment, before taxes


5,531







Income tax (expense) benefit


(1,453
)(1)






Foreign currency translation adjustment, after taxes


4,078







Other comprehensive income (loss)

$
1,387


$
912


$
(2,112
)     (1)
    
    Tax effect calculated from unrealized gain on subsidiary of
    $4,151,000.  Recent
    Accounting Pronouncements
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an Amendment of FASB Statement
    No. 115.
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
 82




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Business
    Combinations  a replacement of FASB Statement
    No. 141
  Reclassifications
    2.
    Investments    December 31, 2007Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


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

$
11,644


$
144


$
(25
)

$
11,763State and municipal


659,178



15,552



(1,467
)


673,263Corporate


40,102



672



(169
)


40,605Total fixed maturity securities


710,924



16,368



(1,661
)


725,631Equity securities


2,520







(358
)


2,162Short-term investments


56,746











56,746$
770,190


$
16,368


$
(2,019
)

$
784,539   December 31, 2006Cost or


Gross


GrossAmortized


Unrealized


UnrealizedCost


Gains


Losses


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

$
12,119


$
4


$
(281
)

$
11,842State and municipal


541,389



17,306



(564
)


558,131Corporate


15,438



1,138



(4
)


16,572Mortgage-backed


46



3







49Total fixed maturity securities


568,992



18,451



(849
)


586,594Equity securities


9,530



954



(67
)


10,417Other investments


5,000











5,000Short-term investments


5,301











5,301$
588,823


$
19,405


$
(916
)

$
607,312  83




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2007Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


Losses(Dollars in thousands)Fixed maturities:U.S. government

$
391


$
(4
)

$
2,729


$
(21
)

$
3,120


$
(25
)State and municipal


84,437



(1,243
)


23,586



(224
)


108,023



(1,467
)Corporate


20,670



(169
)










20,670



(169
)Subtotal


105,498



(1,416
)


26,315



(245
)


131,813



(1,661
)Equity securities


2,162



(358
)










2,162



(358
)Total temporarily impaired securities

$
107,660


$
(1,774
)

$
26,315


$
(245
)

$
133,975


$
(2,019
)   December 31, 2006Less Than 12 Months


12 Months or More


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


Losses


Value


Losses


Value


Losses(Dollars in thousands)Fixed maturities:U.S. government

$



$



$
10,968


$
(281
)

$
10,968


$
(281
)State and municipal


31,094



(159
)


20,632



(405
)


51,726



(564
)Corporate


392



(4
)










392



(4
)Subtotal


31,486



(163
)


31,600



(686
)


63,086



(849
)Equity securities


658



(56
)


205



(11
)


863



(67
)Total temporarily impaired securities

$
32,144


$
(219
)

$
31,805


$
(697
)

$
63,949


$
(916
)    84




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Available-for-SaleAmortized


FairCost


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

$
62,631


$
63,368After one year through five years


196,195



202,403After five years through ten years


273,470



279,487After ten years


178,628



180,373Total

$
710,924


$
725,631     Year Ended December 31,2007


2006


2005(Dollars in thousands)Securities available-for-sale:Fixed maturity securities:Gross realized gains

$
912


$
913


$
25Gross realized losses


(281
)


(222
)


(305
)Equity securities:Gross realized gains


1,328



1,113



396Gross realized losses


(56
)


(207
)


(80
)Foreign currency gross realized gains (losses)


50



(13
)


Other investment losses


(5,002
)






Net realized (losses) gains

$
(3,049
)

$
1,584


$
36       Year Ended December 31,2007


2006


2005(Dollars in thousands)Income:Fixed maturities

$
29,599


$
26,061


$
22,956Preferred stocks


258



313



334Common stocks


57



98



173Cash, cash equivalents and short-term investments


3,931



1,013



42233,845



27,485



23,885Expenses


(909
)


(789
)


(887
)Net investment income

$
32,936


$
26,696


$
22,998  85




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Deferred
    Policy Acquisition Costs    2007


2006


2005(Dollars in thousands)Balance  beginning of period

$
35,143


$
33,684


$
32,453Acquisition costs deferred:Sales compensation


8,207



7,072



6,296Underwriting and issue expenses


11,390



10,655



9,83719,597



17,727



16,133Amortization of acquisition expenses


18,497



16,268



14,902Net increase


1,100



1,459



1,231Balance  end of period

$
36,243


$
35,143


$
33,684   4.
    Reserve
    for Losses and LAE    2007


2006


2005(Dollars in thousands)Balance at January 1,

$
84,352


$
51,074


$
34,041Less: reinsurance recoverables


(1
)


(1
)


(1
)84,351



51,073



34,040Incurred losses and loss adjustment expenses net of reinsurance
    recoveries (principally in respect of default notices received
    in):Current year


332,210



70,141



43,215Deficiency on prior years


40,729



24,086



23,640Total incurred losses and loss adjustment expenses


372,939



94,227



66,855Loss and loss adjustment expense payments net of reinsurance
    recoveries (principally in respect of default notices received
    in):Current year


22,725



7,865



3,734Prior years


81,934



53,084



46,088Total loss and loss adjustment expense payments


104,659



60,949



49,822Net ending balance at December 31,


352,631



84,351



51,073Reinsurance recoverables


7,308



1



1Balance at December 31,

$
359,939


$
84,352


$
51,074    86




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    5.
    Commitments    December 31, 2007(Dollars in thousands)2008

$
2,3582009


1,7552010


1,5762011


1,5012012


1,377$
8,567     6.
    Federal
    Income Taxes    Year Ended December 31,2007


2006


2005(Dollars in thousands)Income tax (benefit) expense computed at statutory rate

$
(45,726
)

$
31,612


$
27,267(Decrease) increase in taxes resulting from:Tax-exempt interest


(9,380
)


(8,330
)


(7,199
)Other


1,920



1,402



1,025Income tax (benefit) expense

$
(53,186
)

$
24,684


$
21,093  87




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006(Dollars in thousands)Deferred tax liabilitiesContingency loss reserve deduction

$
112,801


$
160,103Deferred policy acquisition costs


12,685



12,300Unrealized investment gains


6,475



6,471Other


3,870



2,646Total deferred tax liabilities


135,831



181,520Deferred tax assetsUnearned premiums


3,872



2,835Losses and loss adjustment expenses


6,346



1,640Other


2,316



562Total deferred tax assets


12,534



5,037Net deferred tax liability

$
123,297


$
176,483     7.
    Insurance
    in Force, Dividend Restriction, and Statutory Results      2007


2006(Dollars in thousands)Net risk

$
11,967,179


$
8,612,912Statutory surplus

$
197,713


$
168,439Statutory contingency reserve


387,365



521,836Total

$
585,078


$
690,275Risk-to-capital ratio


20.5 to 1



12.5 to 1    88




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      8.
    Related
    Party Transactions    9.
    Employee
    Benefit Plan    10.
    Reinsurance      Year Ended December 31,2007


2006


2005(Dollars in thousands)Earned premiums:Direct

$
334,406


$
257,006


$
209,708Assumed


1



1



1Ceded


(55,507
)


(46,151
)


(40,712
)Net earned premiums

$
278,900


$
210,856


$
168,997Losses and loss adjustment expenses:Direct

$
380,244


$
94,229


$
66,852Assumed


(1
)


(3
)


4Ceded


(7,304
)


1



(1
)Net losses and loss adjustment expenses

$
372,939


$
94,227


$
66,855  89




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        11.
    Long-Term
    Stock Incentive Plan      Weighted-AverageWeighted-

Aggregate

RemainingNumber of

Average

Intrinsic

ContractualShares

Exercise Price

Value

Term(Dollars in thousands)Outstanding, January 1, 2007


564,712


$
38.36Granted


107,190



43.56Exercised


22,937



26.87Cancelled


3,768



45.06Outstanding, December 31, 2007


645,197



39.60


$




4.6 yearsExercisable, December 31, 2007


493,495



38.60


$




3.3 years  90




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007

2006

2005Expected volatility


31.7
%


33.7
%


34.0
%Expected dividend yield


0.0
%


0.0
%


0.0
%Expected term


5.0 years



5.0 years



7.7 yearsRisk-free rate


4.5
%


4.5
%


4.1
%       Number of

Weighted-AverageShares

Grant-Date Fair ValueNonvested, January 1, 2007


113,941


$
46.41Granted


49,202



43.72Vested


37,318



50.34Cancelled


8,297



47.33Nonvested, December 31, 2007


117,528



43.97         12.
    Credit
    Facility   91




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    13.
    Long-term
    Debt    14.
    Fair
    Value of Financial Instruments    2007

2006Carrying

Fair

Carrying

FairValue

Value

Value

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

$
725,631


$
725,631


$
586,594


$
586,594Equity securities available-for-sale


2,162



2,162



10,417



10,417Other investments










5,000



5,000Financial LiabilitiesLong-term debt


34,519



40,662



34,510



39,231Credit facility


80,000



80,000







             15.
    Contingencies   92




---



##### Table of Contents



TRIAD
    GUARANTY INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    16.
    Subsequent
    Event    17.
    Unaudited
    Quarterly Financial Data    2007 QuarterFirst


Second


Third


Fourth


Year(Dollars in thousands, except per share data)Net premiums written

$
65,707


$
70,165


$
72,554


$
74,797


$
283,223Change in unearned premiums


(1,758
)


(433
)


(465
)


(1,667
)


(4,323
)Earned premiums


63,949



69,732



72,089



73,130



278,900Net investment income


7,349



7,673



8,371



9,543



32,936Net losses incurred


32,581



41,893



106,813



191,652



372,939Underwriting and other expenses


15,648



16,081



17,414



17,357



66,500Net (loss) income


17,322



12,027



(31,850
)


(74,957
)


(77,458
)Basic (loss) earnings per share


1.17



0.81



(2.15
)


(5.05
)


(5.22
)Diluted (loss) earnings per share


1.16



0.80



(2.15
)


(5.05
)


(5.22
)   2006 QuarterFirst


Second


Third


Fourth


Year(Dollars in thousands, except per share data)Net premiums written

$
48,342


$
49,358


$
53,903


$
58,963


$
210,566Change in unearned premiums


(452
)


1,309



174



(741
)


290Earned premiums


47,890



50,667



54,077



58,222



210,856Net investment income


6,222



6,535



6,761



7,178



26,696Net losses incurred


16,351



17,271



19,305



41,300



94,227Underwriting and other expenses


13,068



13,308



14,081



14,141



54,598Net income


18,553



19,587



19,392



8,103



65,635Basic earnings per share


1.26



1.33



1.31



0.55



4.44Diluted earnings per share


1.25



1.31



1.30



0.54



4.40  93




---



##### Table of Contents



SCHEDULE I
 SUMMARY OF INVESTMENTS  OTHER THAN
    INVESTMENTS IN RELATED PARTIES
 TRIAD GUARANTY INC.
 December 31, 2007
  Amount atCost or





Which ShownAmortized


Fair


in BalanceCost


Value


Sheet(Dollars in thousands)Fixed maturity securities, available-for-sale:Bonds:U.S. Government obligations

$
11,644


$
11,762


$
11,762State and municipal bonds


659,178



673,264



673,264Corporate bonds


40,102



40,605



40,605Total


710,924



725,631



725,631Equity securities, available-for-sale:Preferred stock


2,520



2,162



2,162Short-term investments


56,746



56,746



56,746Total investments other than investments in related parties

$
770,190


$
784,539


$
784,539  94




---



##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED BALANCE SHEETS
    TRIAD GUARANTY INC.
    (Parent Company)  December 31,2007


2006(Dollars in thousands)ASSETSFixed maturities, available-for-sale

$
42,438


$
30,021Equity securities, available-for-sale


216



251Notes receivable from subsidiary


25,000



25,000Investment in subsidiaries


544,184



547,220Short-term investments


3,969



213Other invested assets






5,000Cash


1,999



1,880Accrued investment income


1,513



1,513Income taxes recoverable


129



37Other assets


365



Total assets

$
619,813


$
611,135LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Revolving line of credit

$
80,000


$
Long-term debt


34,520



34,510Accrued interest


1,355



1,275Deferred income taxes


4,113



5,102Accrued expenses and other liabilities


974



24Total liabilities


120,962



40,911Stockholders equity:Common stock


149



149Additional paid-in capital


109,679



104,981Accumulated other comprehensive income


13,405



12,018Retained earnings


375,618



453,076Total stockholders equity


498,851



570,224Total liabilities and stockholders equity

$
619,813


$
611,135    95




---



##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED STATEMENTS OF OPERATIONS
    TRIAD GUARANTY INC.
    (Parent Company)
  Year Ended December 31,2007


2006


2005(Dollars in thousands)Revenue:Investment Income:Dividends from subsidiary (Triad)

$
30,000


$



$
Interest income


4,779



3,712



3,510Net investment income


34,779



3,712



3,510Realized investment losses


(4,231
)


(185
)


(87
)30,548



3,527



3,423Expenses:Interest expense


4,376



2,774



2,772Operating expenses


4,278



3,489



1,7838,654



6,263



4,555Income (loss) before federal income taxes and equity in
    undistributed income (loss) of subsidiaries


21,894



(2,736
)


(1,132
)Income tax expense (benefit):Current






176



Deferred


(2,296
)


(676
)


(505
)(2,296
)


(500
)


(505
)Income (loss) before equity in undistributed income (loss) of
    subsidiaries


24,190



(2,236
)


(627
)Equity in undistributed (loss) income of subsidiaries


(101,648
)


67,871



57,440Net (loss) income

$
(77,458
)

$
65,635


$
56,813    96




---



##### Table of Contents



SCHEDULE II 
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    CONDENSED STATEMENTS OF CASH FLOWS
    TRIAD GUARANTY INC.
    (Parent Company)
  Year Ended December 31,2007


2006


2005(Dollars in thousands)Operating Activities:Net (loss) income

$
(77,458
)

$
65,635


$
56,813Adjustments to reconcile net income to net cash provided by
    operating activities:Equity in undistributed income of subsidiaries


101,648



(67,871
)


(57,440
)Accrued investment income






19



(50
)Other assets


(365
)


95



1,156Deferred income taxes


(2,296
)


(676
)


(505
)Income taxes recoverable


(92
)


139



963Accretion of discount on investments


(16
)


3



2Amortization of deferred compensation


3,918



3,476



1,788Amortization of debt issue costs


10



9



8Accrued interest


80







Realized investment losses on securities


4,231



185



87Other liabilities


950



4



(50
)Other operating activities


15



16



2,049Net cash provided by operating activities


30,625



1,034



4,821Investing Activities:Fixed maturities:Purchases


(87,786
)


(9,079
)


(8,795
)Sales and maturities


75,290



11,428



641Cash contributed to subsidiaries:Triad


(50,000
)






TGICC


(45,045
)






Equity securities:Sales










163Purchases of other assets






(5,000
)


Change in short-term investments


(3,756
)


468



161Net cash used in investing activities


(111,297
)


(2,183
)


(7,830
)Financing Activities:Proceeds from revolving credit facility


80,000







Excess tax benefits related to share based payments


175



286



Proceeds from exercise of stock options


616



747



3,269Net cash provided by financing activities


80,791



1,033



3,269Increase in cash


119



(116
)


260Cash at beginning of year


1,880



1,996



1,736Cash at end of year

$
1,999


$
1,880


$
1,996    97




---



##### 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  start-up
  3.
    Investments    Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairAt December 31, 2007

Cost


Gains


Losses


Value(Dollars in thousands)Fixed maturity securities:Corporate

$
27,925


$



$



$
27,925Municipal


14,106



575



(168
)


14,513Total


42,031



575



(168
)


42,438Equity securities


250







(34
)


216Short-term investments


3,969











3,969Total


46,250



575



(202
)


46,623   Cost or


Gross


GrossAmortized


Unrealized


Unrealized


FairAt December 31, 2006

Cost


Gains


Losses


Value(Dollars in thousands)Fixed maturity securities:Corporate

$
500


$
11


$



$
511Municipal


28,286



1,232



(8
)


29,510Total


28,786



1,243



(8
)


30,021Equity securities


250



1







251Other investments


5,000











5,000Short-term investments


213











213Total


34,249



1,244



(8
)


35,485  98




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##### Table of Contents



Year Ended December 31,2007


2006


2005(Dollars in thousands)Income:Fixed maturities

$
1,779


$
1,396


$
1,309Equity securities


18



18



32Dividends received from subsidiary (Triad)


30,000







Cash and short-term investments


790



82



36Note receivable from subsidiary


2,225



2,240



2,23134,812



3,736



3,608Expenses


33



24



98Net investment income


34,779



3,712



3,510   4.
    Long-term
    Debt    5.
    Credit
    Facility   99




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##### Table of Contents



SCHEDULE IV 
    REINSURANCE
    TRIAD GUARANTY INC.
    MORTGAGE INSURANCE PREMIUM EARNED
    Years Ended December 31, 2007, 2006 and 2005  Ceded To

Assumed



Percentage ofGross

Other

From Other

Net

Amount AssumedAmount

Companies

Companies

Amount

to Net(Dollars in thousands)2007

$
334,406


$
55,507


$
1


$
278,900



0.0
%2006

$
257,006


$
46,151


$
1


$
210,856



0.0
%2005

$
209,708


$
40,712


$
1


$
168,997



0.0
%  100




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##### Table of Contents



EXHIBIT INDEXForm 10-K
    for Fiscal Year Ended December 31, 2007 ExhibitNumber

Description of Document3
.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 ending 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, 1998.3
.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.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, 1993.4
.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
.16

Economic Value Added Incentive Bonus Program (Senior
    Management); previously filed as Exhibit 10.16 to the
    Registrants Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 1996, filed
    March 27, 1997, 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 quarter ending 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 ending June 30, 2005, filed
    August 8, 2005, and herein incorporated by reference.10
.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.* 101




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##### Table of Contents



ExhibitNumber

Description of Document10
.33

Employment Agreement, dated January 6, 2006, by and between
    Ronnie D. Kessinger and the Registrant; previously filed as
    Exhibit 10.33 to the Registrants Current Report on
    Form 8-K,
    filed January 11, 2006, and herein incorporated by
    reference.*10
.34

Summary of Director Compensation Plan, effective as of
    January 1, 2006.*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
.36

Amendment to Employment Agreement, dated July 15, 2006,
    between Ronnie D. Kessinger and the Registrant; previously filed
    as Exhibit 10.36 to the Registrants Current Report on
    Form 8-K,
    filed July 17, 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
.38

Resignation and Release Agreement, dated March 20, 2006,
    entered into by and between the Registrant and Eric B. Dana;
    previously filed as Exhibit 10.2 to the Registrants
    Current Report on
    Form 8-K,
    filed April 5, 2006, and herein incorporated by reference.*10
.39

Employment Agreement, dated August 15, 2006, between the
    Registrant and Kenneth N. Lard; previously filed as
    Exhibit 10.37 to the Registrants Current Report on
    Form 8-K,
    filed August 21, 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
.42

Second Amendment to Employment Agreement, dated January 18,
    2007, between Ronnie D. Kessinger and the Registrant; previously
    filed as Exhibit 10.42 to the Registrants Current
    Report on
    Form 8-K;
    filed January 19, 2007, 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.*10
.49

Credit Agreement, dated as of June 28, 2007, among the
    Registrant, Bank of America, N.A., 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 ending June 30, 2007, filed
    August 9, 2007, and herein incorporated by reference.*10
.50

Employment Agreement, dated March 28, 2008, between the
    Registrant and Kenneth C. Foster.*21
.1

Subsidiaries of the Registrant.23
.1

Consent of Independent Registered Public Accounting Firm.31
.1

Certification of the Chief Executive 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. 102




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##### Table of Contents



ExhibitNumber

Description of Document31
.2

Certification of the Chief 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 the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.**32
.2

Certification of the Chief 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 exhibits 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 and Exhibit No. 32.2
    shall not be deemed incorporated into any filing under the
    Securities Act of 1933 or the Securities Exchange Act of 1934. 103