<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TRIAD GUARANTY INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TRIAD GUARANTY INSURANCE LOGO
101 South Stratford Road, Suite 500
Winston-Salem, North Carolina 27104
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1999
To the Stockholders of
TRIAD GUARANTY INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Triad
Guaranty Inc. (the "Company") will be held at Adam's Mark, 425 North Cherry
Street, Winston-Salem, North Carolina, on Thursday, May 13, 1999, at 2:00 p.m.
Eastern Time, for the purpose of considering and acting upon the following
matters:
1. To elect five directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and
qualified; and
2. To consider and act upon such other business as may properly come
before the meeting or any adjournments thereof.
Stockholders of record as of the close of business on April 1, 1999 shall
be entitled to notice of and to vote at the meeting. The transfer books will not
be closed. For ten days prior to the meeting, a list of stockholders entitled to
vote at the meeting will be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, at the offices
of the Company, 101 South Stratford Road, Suite 500, Winston-Salem, North
Carolina 27104. Stockholders who do not expect to attend the meeting in person
are urged to execute and return the accompanying proxy in the envelope enclosed.
By order of the Board of Directors
Earl F. Wall
Secretary
Winston-Salem, North Carolina
April 12, 1999
<PAGE> 3
PROXY STATEMENT
TRIAD GUARANTY INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1999
GENERAL INFORMATION
This proxy statement is being furnished to the stockholders of Triad
Guaranty Inc., a Delaware corporation (the "Company"), 101 South Stratford Road,
Suite 500, Winston-Salem, North Carolina 27104, in connection with the
solicitation of proxies by its Board of Directors for use at the annual meeting
of stockholders to be held on Thursday, May 13, 1999 and at any adjournments
thereof. The approximate date on which this proxy statement and the accompanying
proxy are first being sent to stockholders is April 12, 1999.
The proxy is revocable at any time before it is voted by a subsequently
dated proxy, by written notification to the persons named therein as proxies,
which may be mailed or delivered to the Company at the above address, or by
attendance at the meeting and voting in person. All shares represented by
effective proxies will be voted at the meeting and at any adjournments thereof.
If the enclosed proxy is properly executed and returned in time for voting
with a choice specified thereon, the shares represented thereby will be voted as
indicated thereon. If no specification is made, the proxy will be voted by the
proxy committee for the election as directors of the nominees named below (or
substitutes therefor, if any nominees are unable or refuse to serve) and in its
discretion upon such matters not presently known or determined which may
properly come before the meeting.
The Company has one class of stock outstanding, Common Stock, par value
$.01 per share ("Common Stock"). On April 1, 1999, 13,292,694 shares of Common
Stock were outstanding and entitled to one vote each on all matters to be
considered at the meeting. Stockholders of record as of the close of business on
April 1, 1999 are entitled to notice of and to vote at the meeting. There are no
cumulative voting rights with respect to the election of directors.
Inspectors of election will be appointed to tabulate the number of shares
of Common Stock represented at the meeting in person or by proxy, to determine
whether or not a quorum is present and to count all votes cast at the meeting.
The inspectors of election will treat abstentions and broker nonvotes as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. With respect to the tabulation of votes cast on a specific proposal
presented to the stockholders at the meeting, abstentions will be considered as
present and entitled to vote with respect to that specific proposal, whereas
broker nonvotes will not be considered as present and entitled to vote with
respect to that specific proposal.
<PAGE> 4
PRINCIPAL HOLDERS OF COMMON STOCK
The following table shows, with respect to each person who is known to be
the beneficial owner of more than 5% of the Common Stock of the Company: (i) the
total number of shares of Common Stock beneficially owned as of April 1, 1999;
and (ii) the percent of the Common Stock so owned as of that date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK
------------------- ----------------- ------------
<S> <C> <C>
Collateral Investment Corp.(2)(3)(6)...................... 2,677,500 20.0%
Collateral Mortgage, Ltd.(4)(5)(7)........................ 2,572,500 19.2%
Cincinnati Financial Corporation(16)...................... 712,900 5.3%
</TABLE>
The following table shows with respect to each director and nominee for
director of the Company, the executive officers of the Company named in the
Executive Compensation Table, and all directors and executive officers as a
group, ten in number: (i) the total number of shares of Common Stock
beneficially owned as of April 1, 1999; and (ii) the percent of the Common Stock
so owned as of that date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK
------------------------ ----------------- ------------
<S> <C> <C>
William T. Ratliff, III(8)............................... 165,574(10)(11) 1.2%
Darryl W. Thompson....................................... 338,048(10)(12) 2.5%
David W. Whitehurst(9)................................... 107,880(10) *
Robert T. David.......................................... 19,266(10) *
Raymond H. Elliott....................................... 28,441(10)(14) *
John H. Williams......................................... 241,856(10)(15) 1.8%
Ron D. Kessinger......................................... 52,717(10) *
Henry B. Freeman......................................... 72,252(10)(13) *
Earl F. Wall............................................. 15,072(10) *
----------------
1,041,106
All directors and executive officers as a group (10
persons)(8)(9)......................................... 1,058,762(10) 7.9%
</TABLE>
- ---------------
* Less than one percent.
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) The business address of Collateral Investment Corp., an insurance holding
company ("CIC"), is 1812 University Boulevard, Tuscaloosa, Alabama 35401.
(3) Mr. William T. Ratliff, Jr. is a vice president and director of CIC and
beneficially owns 48.6% of the outstanding voting capital stock of CIC.
Accordingly, Mr. Ratliff, Jr. may be deemed to be the beneficial owner of
the shares of Common Stock owned by CIC. The business address of Mr.
Ratliff, Jr. is
2
<PAGE> 5
1900 Crestwood Boulevard, Birmingham, Alabama 35210-2034. Mr. Ratliff, Jr.
is the father of Mr. William T. Ratliff, III.
(4) The business address of Collateral Mortgage, Ltd., a mortgage banking and
real estate lending firm ("CML"), is 1900 Crestwood Boulevard, Birmingham,
Alabama 35210-2034.
(5) Collat, Inc. ("Collat") is the general partner of CML and as such may be
deemed to be the beneficial owner of the shares of Common Stock owned by
CML. Mr. Ratliff, Jr. is vice president and a director of Collat and
beneficially owns 15.2% of the outstanding voting capital stock of Collat.
Mr. Ratliff, Jr. also beneficially owns 30.5% of the outstanding limited
partnership interests in CML. Accordingly, Mr. Ratliff, Jr. may be deemed
to be the beneficial owner of the shares of Common Stock owned by CML. The
business address of Collat and Mr. Ratliff, Jr. is 1900 Crestwood
Boulevard, Birmingham, Alabama 35210-2034.
(6) 440,000 shares of Common Stock owned by CIC are pledged to secure a bank
loan.
(7) The shares of Common Stock owned by CML are pledged to secure a bank loan.
(8) Mr. William T. Ratliff, III is president and a director of CIC and
beneficially owns 2.8% of the outstanding voting capital stock of CIC. Mr.
Ratliff, III beneficially owns 7.1% of the outstanding limited partnership
interests in CML. Mr. Ratliff, III is also president and a director of
Collat, the general partner of CML, and beneficially owns 35% of the
outstanding voting capital stock of Collat. Accordingly, Mr. Ratliff, III
may be deemed to be the beneficial owner of the shares of Common Stock
owned by CIC and CML. The business address of Mr. Ratliff, III is 1900
Crestwood Boulevard, Birmingham, Alabama 35210-2034. Mr. Ratliff, III is
the son of Mr. Ratliff, Jr. No other director or executive officer of the
Company beneficially owns any capital stock of CIC or partnership interests
in CML.
(9) Mr. David W. Whitehurst is executive vice president and chief operating
officer of CIC. Accordingly, Mr. Whitehurst may be deemed to be the
beneficial owner of the shares of Common Stock owned by CIC. The business
address of Mr. Whitehurst is 1812 University Boulevard, Tuscaloosa, Alabama
35401.
(10) Includes shares of Common Stock which could be acquired through the
exercise of stock options as follows: Mr. Ratliff, III, 116,962 shares; Mr.
Thompson, 276,973 shares; Mr. Whitehurst, 95,190 shares; Mr. David, 13,266
shares; Mr. Elliott, 13,441 shares; Mr. Williams, 202,970 shares; Mr.
Freeman, 48,810 shares; Mr. Kessinger, 31,549 shares; Mr. Wall, 8,291
shares; all directors and executive officers as a group, 823,354 shares.
(11) Includes 1,500 shares owned by Mr. Ratliff's wife and 5,700 shares owned by
his minor children.
(12) Includes 1,800 shares owned by Mr. Thompson's wife.
(13) Includes 600 shares owned by Mr. Freeman's wife.
(14) Includes 15,000 shares owned by Mr. Elliott's wife.
(15) Includes 300 shares owned by Mr. Williams' minor children.
(16) Number of shares reported in the most recent Schedule 13G filed by
Cincinnati Financial Corporation ("Cincinnati Financial") with the
Securities and Exchange Commission. Cincinnati Financial has sole voting
power and sole dispositive power with respect to all 712,900 shares. The
business address of Cincinnati Financial is P. O. Box 145496, Cincinnati,
Ohio, 45250-5496.
3
<PAGE> 6
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS
At the meeting, five directors are to be elected to hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. All of the nominees are presently directors of the Company. The
affirmative vote of the holders of a plurality of the shares of Common Stock
represented in person or by proxy at the annual meeting is required to elect
directors. It is intended that, in the absence of contrary specifications, votes
will be cast pursuant to the enclosed proxies for the election of such nominees.
Should any of the nominees become unable or unwilling to accept nomination or
election, it is intended, in the absence of contrary specifications, that the
proxies will be voted for the balance of those named and for a substitute
nominee or nominees. However, the Company now knows of no reason to anticipate
such an occurrence. All of the nominees have consented to be named as nominees
and to serve as directors if elected.
The Company was incorporated on August 16, 1993 for the purpose of holding
all of the outstanding stock of Triad Guaranty Insurance Corporation, an
Illinois insurance company ("Triad"), and to undertake the Company's initial
public offering.
The following persons are nominees for election as directors of the
Company:
WILLIAM T. RATLIFF, III Age -- 45 Director since -- 1993
Mr. Ratliff has been the Chairman of the Board of the Company since
1993. Mr. Ratliff has also been Chairman of the Board of Triad since
1989, President of Collateral Investment Corp. ("CIC") since 1990 and
was President and General Partner of Collateral Mortgage, Ltd. ("CML")
from 1987 to 1995. Mr. Ratliff has been Chairman of New South Federal
Savings Bank ("New South") since 1986 and President and a director of
New South Bancshares, Inc., New South's parent company, since 1995. From
March 1994 until December 1996, Mr. Ratliff served as President of
Southwide Life Insurance Corp., of which he had been Executive Vice
President since 1983. Mr. Ratliff joined CML in 1981 after completing
his doctoral degree with a study of planning processes in an insurance
company. Previously, he trained and worked as an educator, counselor and
organizational consultant.
DARRYL W. THOMPSON Age -- 58 Director since -- 1993
Mr. Thompson has been President and Chief Executive Officer of the
Company since 1993. Mr. Thompson has also been President, Chief
Executive Officer and a Director of Triad since its inception in 1987.
From 1986 to 1989, Mr. Thompson also served as President and Chief
Executive Officer of Triad Life Insurance Company, which sold mortgage
insurance products. From 1976 to 1985, Mr. Thompson served as Senior
Vice President/Southeast Division Manager of Mortgage Guaranty Insurance
Corporation. Mr. Thompson joined Mortgage Guaranty Insurance Corporation
in 1972.
DAVID W. WHITEHURST Age -- 49 Director since -- 1993
Mr. Whitehurst has been Executive Vice President, Chief Financial
Officer and Treasurer of the Company since 1993, and served as Secretary
of the Company from 1993 until 1996. Mr. Whitehurst has also been a Vice
President and Director of Triad since 1989, Executive Vice President of
CIC since 1995 (Vice President from 1990 to 1995), was Chief Financial
Officer of CIC from 1990 through 1995, was Executive Vice President of
Southwide Life Insurance Corp. from 1992 until 1996 and has been a
director of New South since 1989. Since January 1997, Mr. Whitehurst has
been President, Treasurer and a Director of
4
<PAGE> 7
Southland National Insurance Corp. and its subsidiaries. Mr. Whitehurst
joined CML in 1989 and served as Vice President of CML and its
affiliates until 1992, when he began devoting all of his time to CIC and
its affiliates. Mr. Whitehurst is a certified public accountant.
ROBERT T. DAVID Age -- 60 Director since -- 1993
Mr. David is President and Chief Executive Officer of Polatomic, Inc.
From 1995 until 1996, Mr. David was the Garrett Professor of Business
Administration at Berry College in Rome, Georgia. From 1988 through
1994, Mr. David was Vice President and Dean of the Samford University
School of Business.
RAYMOND H. ELLIOTT Age -- 68 Director since -- 1993
Mr. Elliott was Chairman of Flag Development Company, a partnership
representing international and domestic investors involved with land
development, from 1986 to 1996. Mr. Elliott has been a Trustee of
Neighborhood Housing Services of America, Inc. since 1987. From 1973 to
1985, Mr. Elliott served as President of the Federal Home Loan Bank of
Boston.
THE BOARD OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors. During 1998, the Board of Directors met five times. No
director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and the committees on which he served.
BOARD COMMITTEES
The Board of Directors has three standing committees, the Executive
Committee, the Audit Committee and the Compensation Committee.
The Executive Committee is empowered to exercise the authority of the Board
of Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors, except as such authority may be
limited by the provisions of the General Corporation Law of the State of
Delaware. The Executive Committee, which is composed of Messrs. Ratliff
(Chairman), Thompson and Whitehurst, acted once by written consent during 1998.
The Audit Committee recommends to the Board of Directors the appointment of
the independent auditors for the following year. The Audit Committee also
reviews the scope of the annual audit, the annual financial statements of the
Company and the auditor's report thereon and the auditor's comments relative to
the adequacy of the Company's system of internal controls and accounting
systems. The Audit Committee, which is composed of Messrs. Elliott (Chairman)
and David, met four times in 1998.
The Compensation Committee reviews management compensation levels and
provides recommendations regarding salaries and other compensation for the
Company's officers, including bonuses, grants of stock options and other
incentive programs. The Compensation Committee serves as the committee that
administers the Company's 1993 Long-Term Stock Incentive Plan. The Compensation
Committee, which is composed of Messrs. David (Chairman) and Elliott, met five
times in 1998.
The Company does not have a standing nominating committee of the Board of
Directors. This function is performed by the Board of Directors. The Company's
Certificate of Incorporation establishes procedures, including advance notice
procedures, with regard to the nomination, other than by or at the direction of
the Board of Directors, of candidates for election as directors. In general,
notice must be received by the Company at its principal executive offices not
less than 60 days nor more than 90 days prior to meetings of stockholders of the
Company.
5
<PAGE> 8
Such notice must set forth all information with respect to each such nominee as
required by the federal proxy rules. Such notice must be accompanied by a signed
statement of such nominee consenting to be a nominee and a director, if elected.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
GENERAL
The purpose of the Company's executive compensation program is to enable
the Company to attract, retain and motivate qualified executives to insure the
long-term success of the Company and its business strategies.
The Company's overall compensation philosophy is as follows:
- to attract, retain and motivate qualified executive talent critical for
the long-term success of the Company;
- to reinforce strategic performance objectives through the use of
incentive compensation programs; and
- to create a mutuality of interest between executive officers and the
stockholders through compensation structures that align compensation with
the rewards and risks of strategic decision making.
The Compensation Committee's objectives include linking compensation to
improving return on equity using economic value added ("EVA") concepts. (EVA is
a registered trademark of Stern Stewart & Co.) Accordingly, beginning with the
1996 calendar year, the Compensation Committee developed certain models for
measuring EVA and determining the portion of that value which will be available
for incentive compensation awards. These concepts were incorporated in a set of
program guidelines (the "EVA Program") approved by the Board of Directors and
implemented for 1996. Under the EVA Program as established by the Compensation
Committee and the Board of Directors, it is expected that the Company will
provide a return to stockholders based on the estimated current cost of capital
and market risk associated with an investment in the Company's business. To the
extent the Company provides a rate of return in excess of this "cost of
capital," there has been economic value added to the Company and a discretionary
bonus pool based on a portion of the EVA is established to provide incentive
compensation to senior management. In recognition of the need for the Company in
its earlier years to have a relatively large amount of capital in order to
obtain the state licenses and claims -- paying ability ratings from rating
agencies required for its growth, the EVA Program is designed to recognize
improvements in the rate of return during an interim period. Awards of amounts
in the bonus pool to individual participants are based on the individual's
contribution to the Company during the year as determined by the Committee after
considering recommendations of the Chairman and the President and an evaluation
of expected operating results in the future. It is intended that any amounts
allocated to the bonus pool be payable to participants over a four year period,
subject to the right of the Committee to reduce or suspend any such payouts, and
subject to review of the individual participants on an annual basis. Awards
under the Program are made in the form of cash bonuses and equity grants within
guidelines established under the EVA Program. In establishing the EVA Program,
it is the Committee's long-term objective that incentive compensation (cash and
equity awards) become a more significant component in the total executive
compensation package. The Committee believes this approach will create a
stronger mutuality of interests between the Company's executive officers and
stockholders by requiring the executive officers to share in the Company's
operating results and stock market performance. Under the EVA Program, incentive
compensation awards in the future could be significantly greater or less than
awards made in 1998 and prior years. All of the Company's executive officers
currently participate in the EVA Program.
6
<PAGE> 9
The Company, through its wholly-owned subsidiary, Triad, has employment
agreements described elsewhere in this proxy statement with Messrs. Thompson,
Williams, Kessinger and Freeman. These agreements are intended to secure for the
Company the continued services of the officers and provide them appropriate
incentives for maximum effort on behalf of the Company. Salary levels
established under the employment agreements are subject to annual review. The
Company also maintains the 1993 Long-Term Stock Incentive Plan (the "Stock
Incentive Plan" or "Plan") under which grants of restricted Common Stock and
options to purchase stock have been made as described elsewhere in this proxy
statement.
The compensation of each of the executive officers of the Company is
composed of base compensation and incentive compensation (except for Messrs.
Ratliff and Whitehurst, who are eligible to receive only incentive compensation
as discussed below). The 1998 compensation of the Company's Chief Executive
Officer, Mr. Thompson, was subject to the same policies as are applicable to all
other executive officers of the Company. All executive compensation awards for
1998 were determined by the Compensation Committee. The Committee has been
further assisted by independent compensation consultants regarding Company-wide
benefits as well as the ongoing structure of the overall compensation package
for the executive officers, including the development of the EVA Program.
Messrs. Ratliff and Whitehurst are employed by New South or CIC and do not
receive separate salaries from the Company for their services to the Company.
Triad is party to an Administrative Services Agreement with CIC and New South
described elsewhere herein. The services of Messrs. Ratliff and Whitehurst to
the Company are charged to the Company under the Administrative Services
Agreement. The Compensation Committee believes that the terms of this agreement
are no less favorable to the Company than could be obtained from unaffiliated
third parties. Messrs. Ratliff and Whitehurst are also eligible to participate
in the EVA Program and to receive incentive compensation based upon the
Compensation Committee's evaluation of their contributions to the Company. See
"Directors' Compensation."
Overall executive compensation levels for 1998 were higher than for 1997.
Consistent with the Company's results for 1998, cash bonuses and stock option
awards to the executive officers were higher in 1998 than in 1997.
Section 162(m) under the Internal Revenue Code adopted in 1993 limits the
deductibility for federal income tax purposes of certain compensation paid to
top executives of publicly held corporations. Certain types of compensation may
be excluded from the limitations under Section 162(m). The Compensation
Committee believes that the tax aspects of executive compensation awards are one
of several important considerations and it will continue to review the
applicability of the Internal Revenue Code limitations to its executive
compensation programs. However, the Committee intends to maintain the
flexibility to take any actions which it deems to be in the interests of the
Company and its stockholders.
Policies relative to each of the elements of compensation of the executive
officers are discussed below.
BASE COMPENSATION
The Committee's approach to base compensation is to offer competitive
salaries, consistent with its long-term objective that base salaries become a
smaller component in the total executive compensation package. Those executive
officers covered by employment agreements receive base salaries under those
agreements, subject to annual review, and are eligible for incentive
compensation awards as well.
The Committee makes salary decisions in an annual review with input from
the Chief Executive Officer. In the case of Mr. Thompson, the Committee is
guided by the recommendation of the Chairman of the Board. The Committee's
review considers the decision-making responsibilities of each position and the
experience, work
7
<PAGE> 10
performance, and overall contribution of the executive officer to the Company in
relationship to overall Company performance. In general, the salary decisions
are subjective with no quantitative measures utilized. In establishing 1998
salaries of the Company's executive officers, the Compensation Committee
considered the responsibilities, experience and performance of the individual in
relationship to the Company's growth and financial results. The Committee also
took into account the compensation of executives at comparable companies
(companies within the private mortgage insurance industry as well as those
outside the industry). The 1998 average base salaries of the executive officers
which appear in the Executive Compensation Table increased 5.3% in 1998.
INCENTIVE COMPENSATION
The Company's incentive compensation awards for 1998 were based on the
guidelines established by the Compensation Committee under the EVA Program.
Awards granted under the EVA Program consist of a maximum of 50% in cash to the
Chairman, the President or an Executive Vice President and a maximum of 75% in
cash to a Vice President, or such lesser cash percentages as may be determined
by the Committee. The balance of the awards are made in the form of equity
grants under the Company's Stock Incentive Plan.
Total incentive compensation for each executive under the EVA Program is
determined by the Compensation Committee. The Compensation Committee determines
the individuals to whom the awards are granted, the type and amount of awards to
be granted, the timing of grants and the terms, conditions and provisions of
awards to be granted, and the restrictions related thereto. In making those
awards, the Committee considers the recommendations of the Company's Chairman
and President, the responsibilities of each individual, and his past performance
and contributions to the Company and anticipated future contributions to the
Company, in relationship to the Company's overall performance.
CASH AWARDS
The average cash bonus awarded to the executive officers named in the
Executive Compensation Table was 67.3% of their base salaries in 1998 and 62.7%
in 1997. Awards for 1998 were made consistent with the guidelines established
under the EVA Program.
EQUITY AWARDS
Pursuant to the Company's Stock Incentive Plan, certain directors, officers
and key employees of the Company are eligible to receive long-term incentives in
a variety of forms including nonqualified stock options, incentive stock
options, stock appreciation rights, restricted stock, phantom stock and other
stock-based awards. The purpose of the Stock Incentive Plan is to enable the
Company to attract and retain the best available directors, executive personnel
and other key employees in order to provide for the Company's long-term growth
and business success. The Compensation Committee believes that the grant of
awards whose value is related to the value of the Company's Common Stock aligns
the interests of the Company's directors, executive officers and key employees
with its stockholders.
For 1998, all awards to the executive officers under the Stock Incentive
Plan represented the equity portion of the overall incentive compensation award
for such individual. The Committee considered grants under the Plan in the form
of shares of restricted stock valued at the market price of the Company's Common
Stock on the date of grant or in the form of ten-year stock options exercisable
at either the market price on the date of grant or 130 percent of that price.
The Committee utilized a Black-Scholes pricing model and applied a discount for
non-transferability of options and deferred vesting to determine the number of
"at the market options" or "premium priced options" which would be awarded
relative to shares of restricted stock. For 1998, the awards to all of the
8
<PAGE> 11
executive officers were made in the form of shares of restricted stock and at
the market or premium priced options for ten years, which vest one-third per
year beginning in December, 1999. These awards are summarized in footnotes to
the Executive Compensation Table elsewhere herein.
The salary and incentive compensation, including cash and equity amounts,
paid by the Company to its chief executive officer and the other four most
highly compensated executive officers of the Company in 1998 is set forth in the
tables that follow this report. The Compensation Committee believes that the
executive officers of the Company are dedicated to increasing profitability and
stockholder value and that the compensation policies that the Board and the
Compensation Committee have established and administer contribute to this focus.
COMPENSATION COMMITTEE
Robert T. David
Raymond H. Elliott
The foregoing Report of the Board of Directors on Executive Compensation
shall not be deemed to be incorporated by reference into any filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates such information
by reference.
9
<PAGE> 12
EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation paid or accrued by the Company to or for the account of the Chief
Executive Officer and the four most highly compensated executive officers of the
Company during each of the Company's fiscal years ended December 31, 1998, 1997
and 1996:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(2)
------------------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION RESTRICTED OPTIONS(#) ALL OTHER
------------------------ STOCK ---------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARDS(3) (4)(5)(6) ($)(7)
--------------------------- ---- --------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Darryl W. Thompson, 1998 $232,183 $179,591 57,525 $5,000
Chief Executive Officer 1997 225,420 165,000 21,875 4,750
1996 225,420 125,000 40,500 4,750
John H. Williams, 1998 178,120 103,397 33,125 5,000
Executive Vice President 1997 173,120 95,000 7,550 4,750
of Triad 1996 173,120 75,000 24,300 4,750
Ron D. Kessinger, 1998 143,000 103,397 5,825 4,200 5,000
Executive Vice President 1997 130,000 95,000 9,075 4,750
of Triad 1996 125,833 72,500 18,800 4,750
Henry B. Freeman, 1998 121,000 69,378 7,425 5,000
Vice President 1997 117,000 63,750 2,825 4,750
of Triad 1996 117,000 48,750 5,300 4,750
Earl F. Wall, 1998 90,000 58,733 7,100 5,000
Vice President, Secretary and 1997 80,000 36,000 4,775 4,710
General Counsel 1996 80,000 37,500 10,050 -0-
</TABLE>
- ---------------
(1) The Company maintains an executive bonus program pursuant to which cash
bonuses may be awarded annually to officers and other key employees of the
Company as a part of overall incentive compensation awards.
(2) Number of shares of Common Stock subject to options, or awards of restricted
stock, granted during or with respect to the year indicated under the
Company's Stock Incentive Plan.
(3) As a part of its 1998 incentive compensation awards, the Company in January
1999 granted 5,825 shares of restricted stock to Mr. Kessinger under the
Company's Stock Incentive Plan. The value of shares of restricted stock is
based upon the closing price of the Company's Common Stock on the date of
grant ($17.88). One-third of the restricted shares granted will be vested
and transferable on December 31, 1999, another third will be vested and
transferable on December 31, 2000, and on December 31, 2001 all of the
restricted shares will be vested and transferable. Holders of restricted
stock are entitled to receive dividends or other distributions with respect
to such shares during the period of restriction. Such restricted stock
awards become immediately vested
10
<PAGE> 13
and transferable in the event of a change in control. See "Report of the
Compensation Committee of the Board -- Incentive Compensation."
(4) As a part of its 1998 incentive compensation awards, the Company in January
1999 granted stock options to the named executive officers to purchase
shares of Common Stock under the Company's Stock Incentive Plan in the
amounts and at the exercise prices indicated: Mr. Thompson, 57,525 shares at
$23.24 per share; Mr. Williams, 33,125 shares at $23.24 per share; Mr.
Kessinger, 4,200 shares at $23.24 per share; Mr. Freeman, 7,425 shares at
$23.24 per share; and Mr. Wall, 7,100 shares at $23.24 per share. One-third
of the options granted will be vested and exercisable on December 31, 1999,
another third will be vested and exercisable on December 31, 2000, and on
December 31, 2001 all of the options granted will be vested and exercisable.
All options will become immediately vested and exercisable in the event of a
change in control of the Company. The exercise price of $23.24 is 130% of
the closing market price of the Company's Common Stock on the date of grant
($17.88). See "Report of the Compensation Committee of the Board --
Incentive Compensation."
(5) As a part of its 1997 incentive compensation awards, the Company in January
1998 granted stock options to the named executive officers to purchase
shares of Common Stock under the Company's Stock Incentive Plan in the
amounts and at the exercise prices indicated: Mr. Thompson, 21,875 shares at
$49.08 per share; Mr. Williams, 7,550 shares at $37.75 per share; Mr.
Kessinger, 5,300 shares at $37.75 per share and 3,775 shares at $49.08 per
share; Mr. Freeman, 2,825 shares at $49.08 per share; and Mr. Wall, 4,775
shares at $49.08 per share. One-third of the options granted became vested
and exercisable on December 31, 1998, another third will be vested and
exercisable on December 31, 1999, and on December 31, 2000 all of the
options granted will be vested and exercisable. All options will become
immediately vested and exercisable in the event of a change in control of
the Company. The exercise price of $37.75 was the closing market price of
the Company's Common Stock on the date of grant. The exercise price of
$49.08 is 130% of the closing market price of the Company's Common Stock on
the date of grant. See "Report of the Compensation Committee of the Board --
Incentive Compensation."
(6) As a part of its 1996 incentive compensation awards, the Company in January
1997 granted stock options to the named executive officers to purchase
shares of Common Stock under the Company's Stock Incentive Plan in the
amounts and at the exercise prices indicated: Mr. Thompson, 40,500 shares at
$20.07 per share; Mr. Williams, 24,300 shares at $20.07 per share; Mr.
Kessinger, 11,750 shares at $20.07 per share and 7,050 shares at $15.44 per
share; Mr. Freeman, 5,300 shares at $20.07 per share; and Mr. Wall, 4,050
shares at $20.07 per share. One third of the options granted became vested
and exercisable on January 22, 1998, another third became vested and
exercisable on January 22, 1999, and on January 22, 2000 all of the options
granted will be vested and exercisable. All options will become immediately
vested and exercisable in the event of a change in control of the Company.
The exercise price of $15.44 was the closing market price of the Company's
Common Stock on the date of grant. The exercise price of $20.07 is 130% of
the closing market price of the Company's Common Stock on the date of grant.
See "Report of the Compensation Committee of the Board -- Incentive
Compensation." In addition, the Company granted 6,000 options at $14.25 (the
closing market price on the date of grant) to Mr. Wall in September 1996 as
a hiring bonus. One-third of these options became vested and exercisable on
September 4, 1997, one-third became vested and exercisable on September 4,
1998 and one-third will be vested and exercisable on September 4, 1999.
(7) Matching contributions made by the Company pursuant to its 401(k) Profit
Sharing Retirement Plan.
11
<PAGE> 14
EMPLOYEE STOCK OPTIONS
Option Grants. The following table sets forth certain information regarding
options to purchase shares of Common Stock granted to the executive officers of
the Company named in the Executive Compensation Table during the Company's 1998
fiscal year:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(3)
OPTIONS TO EMPLOYEES IN PRICE -----------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) EXPIRATION DATE 5%($) 10%($)
---- ------------- --------------- --------- --------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Darryl W. Thompson.... 21,875 17.27% $49.08 January 19, 2008 $271,591 $1,068,346
John H. Williams...... 7,550 5.96% $37.75 January 19, 2008 179,242 454,236
Ron D. Kessinger...... 3,775 2.98% $49.08 January 19, 2008 46,869 184,366
5,300 4.18% $37.75 January 19, 2008 125,825 318,868
Henry B. Freeman...... 2,825 2.23% $49.08 January 19, 2008 35,074 137,969
Earl F. Wall.......... 4,775 3.77% $49.08 January 19, 2008 59,284 233,205
</TABLE>
- ---------------
(1) All options granted under the Company's Stock Incentive Plan are
nonqualified stock options. The options granted to Messrs. Thompson,
Williams, Kessinger, Freeman and Wall were granted in January 1998. One
third of the options granted became vested and exercisable on December 31,
1998, one-third will be vested and exercisable on December 31, 1999, and
one-third will be vested and exercisable on December 31, 2000. All options
will become immediately vested and exercisable in the event of a change in
control of the Company.
(2) The option exercise price of $37.75 was the closing market price of the
Company's Common Stock on the date of grant. The option exercise price of
$49.08 is equal to 130% of the closing market price of the Company's Common
Stock on the date of grant.
(3) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Company's Common Stock increasing over such ten-year periods to
$61.49 and $97.91, respectively (based on the grant date price of $37.75).
Option Exercises. The following table sets forth certain information
regarding options to purchase shares of Common Stock exercised during the
Company's 1998 fiscal year and the number and value of unexercised options to
purchase shares of Common Stock held at the end of the Company's 1998 fiscal
year by the executive officers of the Company named in the Executive
Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
NUMBER OF FISCAL YEAR END(#) FISCAL YEAR END($)(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Darryl W. Thompson............. -- -- 276,973/28,084 $3,702,968/$26,899
John H. Williams............... -- -- 202,970/13,134 2,667,905/ 16,139
Ron D. Kessinger............... 52,398 $1,106,461 31,549/12,319 290,435/ 23,374
Henry B. Freeman............... -- -- 48,810/ 3,651 687,434/ 3,521
Earl F. Wall................... -- -- 8,291/ 6,534 36,630/ 18,315
</TABLE>
- ---------------
(1) Value realized is equal to the difference between the fair market value per
share of Common Stock on the date of exercise and the option exercise price
per share multiplied by the number of shares acquired upon exercise of an
option.
12
<PAGE> 15
(2) Value of unexercised options is equal to the difference between the fair
market value per share of Common Stock at December 31, 1998 and the option
exercise price per share multiplied by the number of shares subject to
options.
EMPLOYMENT AGREEMENTS
In October 1993, the Company, through its wholly-owned subsidiary Triad,
entered into employment agreements with Messrs. Thompson, Williams, Kessinger
and Freeman. These agreements had initial terms of two years and upon expiration
extend automatically for successive one-year terms unless terminated by either
party. Base annual salary for 1999 under the agreements is as follows: Mr.
Thompson, $232,183; Mr. Williams, $178,120; Mr. Kessinger, $146,000; and Mr.
Freeman, $121,000. The agreements are terminable by Triad in the event of the
death of the employee, absence over a period of time due to incapacity, a
material breach of his duties and obligations under the agreement or other
serious misconduct. The agreements also are terminable by Triad without cause;
provided, however, that in such event, the executive is entitled to a cash
amount equal, in the case of Messrs. Thompson, Williams and Kessinger, to 200%
of the total base annual salary paid to such executive during the two previous
calendar years and, in the case of Mr. Freeman, 160% of the total base annual
salary paid to such executive during the previous calendar year.
The employment agreements provide that in the event of a change in control
of the Company (as defined in the agreements) and the termination of the
executive's employment by the executive as a result of his relocation or certain
specified adverse changes in his employment status or compensation, the
executive is entitled to a cash amount equal, in the case of Messrs. Thompson,
Williams and Kessinger, to 200% of the total base annual salary paid to such
executive during the two previous calendar years and, in the case of Mr.
Freeman, 160% of the total base annual salary paid to such executive during the
previous calendar year.
The employment agreements contain certain noncompetition provisions
restricting each executive from competing with the business of Triad for a
period of two years, in the case of Messrs. Thompson, Williams and Kessinger,
and one year, in the case of Mr. Freeman, following termination of his
employment.
DIRECTORS' COMPENSATION
Directors who are employees of the Company or any of its subsidiaries do
not receive any compensation for serving as directors of the Company. For 1998,
Directors who were not employees of the Company or any of its subsidiaries or
affiliates received an annual retainer of $30,000 of which at least 25% must be
paid in the form of restricted shares of Common Stock or options to purchase
shares of Common Stock. In addition, Messrs. Ratliff and Whitehurst are eligible
to participate in the EVA Program and to receive incentive compensation based
upon the Compensation Committee's evaluation of their contributions to the
Company. For 1998, Messrs. Ratliff and Whitehurst were awarded cash bonuses in
the amount of $46,252 and $29,942, respectively, and stock options to purchase
14,825 and 9,625 shares, respectively, of Common Stock at $23.24 per share(1).
All directors are reimbursed for expenses incurred in attending board meetings.
- ---------------
(1) One-third of the options granted will be vested and exercisable on December
31, 1999, another third will be vested and exercisable on December 31, 2000,
and on December 31, 2001 all of the options granted will be vested and
exercisable. All options will become immediately vested and exercisable in
the event of a change in control of the Company. The exercise price of
$23.24 is 130% of the closing market price of the Company's Common Stock on
the date of grant ($17.88).
13
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of Messrs. David and Elliott.
Neither member of the Compensation Committee is or was formerly an officer or
employee of the Company or any of its subsidiaries.
CERTAIN TRANSACTIONS
The Company engaged in certain transactions with CIC, CML and New South
Federal Savings Bank during 1998 as described below. CIC and CML own 20.0% and
19.2%, respectively, of the Common Stock of the Company. Mr. Ratliff, Chairman
of the Board of the Company, is also President of CIC, former President and
former General Partner of CML, and Chairman of the Board of New South. Mr.
Whitehurst, Executive Vice President and Treasurer of the Company, is Executive
Vice President of CIC and a director of New South. All transactions between the
Company and CIC, CML or New South have been, and will be, on terms no less
favorable to the Company than could have been, or than could be, obtained from
unaffiliated third parties.
Investment Advisory Agreement. Triad is a party to an investment advisory
agreement with CML under which CML provides investment advice and services to
Triad and assists Triad in executing purchases and sales of investments. Under
the investment advisory agreement, Triad pays CML a quarterly fee based upon the
value of assets under supervision. During 1998, Triad incurred fees of $231,143
pursuant to the investment advisory agreement.
Administrative Services Agreement. Triad is a party to an administrative
services agreement with CIC and New South under which CIC or New South provide
Triad with certain management services. Under the administrative services
agreement, Triad pays CIC and New South an annual fee based on the estimated
cost of providing the services. During 1998, Triad incurred fees of $105,000
pursuant to the administrative services agreement.
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the Nasdaq Stock Market (U.S.)
Index, the Nasdaq Financial Stocks Index and the Nasdaq Insurance Stocks Index
for the period beginning on October 22, 1993 (the date of the Company's initial
public offering) and for each year end through December 31, 1998.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ FINANCE NASDAQ INSURANCE
TRIAD GUARANTY INC. MARKET (U.S.) STOCKS STOCKS
------------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
10/22/93 100.00 100.00 100.00 100.00
'1993' 101.56 99.73 98.80 94.72
'1994' 79.69 97.48 99.04 89.16
'1995' 165.62 137.88 144.23 126.65
'1996' 269.52 169.55 184.89 144.37
'1997' 543.73 208.01 282.45 211.77
'1998' 413.66 292.40 273.27 188.28
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
10/22/93 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Triad Guaranty Inc. 100 101.56 79.69 165.62 269.52 543.73 413.66
- -----------------------------------------------------------------------------------------------------------------
NASDAQ Stock Market (U.S.) 100 99.73 97.48 137.88 169.55 208.01 292.40
- -----------------------------------------------------------------------------------------------------------------
NASDAQ Finance Stocks 100 98.80 99.04 144.23 184.89 282.45 273.27
- -----------------------------------------------------------------------------------------------------------------
NASDAQ Insurance Stocks 100 94.72 89.16 126.65 144.37 211.77 188.28
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The graph assumes $100 invested on October 22, 1993 in the Company's Common
Stock, the Nasdaq Stock Market (U.S.) Index, the Nasdaq Financial Stocks Index
and the Nasdaq Insurance Stocks Index. The Nasdaq indices were prepared for
Nasdaq by the Center for Research in Security Prices at the University of
Chicago.
The foregoing table shall not be deemed to be incorporated by reference
into any filing of the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference.
15
<PAGE> 18
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's consolidated financial statements for the year ended December
31, 1998 were audited by Ernst & Young, independent auditors. Ernst & Young has
been selected as the Company's independent auditors for fiscal year 1999.
Representatives of Ernst & Young are expected to attend the annual meeting to
respond to appropriate questions and to make an appropriate statement if they
desire to do so.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholders intending to present a proposal for consideration at the
Company's next annual meeting may do so by following the procedures prescribed
in Rule 14a-8 under the Securities Exchange Act of 1934 and the Company's
Certificate of Incorporation. To be eligible for inclusion in the Company's
proxy statement, stockholder proposals must be received by the Company no later
than December 13, 1999. Notice to the Company of a stockholder proposal
submitted otherwise than pursuant to Rule 14a-8 will be considered untimely if
received by the Company after February 26, 2000, and the proxies named in the
accompanying form of proxy may exercise discretionary voting power with respect
to any such proposal as to which the Company does not receive a timely notice.
OTHER MATTERS
The Company is not aware of any matters, other than those referred to
herein, which will be presented at the meeting. If any other appropriate
business should properly be presented at the meeting, the proxies named in the
accompanying form of proxy will vote the proxies in accordance with their best
judgment.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. In addition to solicitation by mail, arrangements have been
made with brokerage houses and other custodians, nominees, and fiduciaries to
send the proxy material to their principals, and the Company will reimburse them
for their reasonable out-of-pocket expenses in doing so. Proxies may also be
solicited personally or by telephone or telegraph by regular employees of the
Company.
Winston-Salem, North Carolina
April 12, 1999
16
<PAGE> 19
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C>
PROXY
================================================================== 1. Election of Directors,
TRIAD GUARANTY INC. Nominees are:
==================================================================
This Proxy is Solicited on Behalf of the Board of Directors Robert T. David
Raymond H. Elliott For With- For All
This proxy, when properly executed, will be voted in the manner William T. Ratliff, III All* hold Except
directed herein by the undersigned stockholder. If no direction Darryl W. Thompson
is made, this proxy will be voted FOR Proposal 1. This David W. Whitehurst [ ] [ ] [ ]
proxy is revocable at any time.
* FOR all listed nominees or a substitute therefor if any
Mark box at right if an address change has been noted on the [ ] nominee is unable or, for good cause, refuses to serve.
reverse side of this card. If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and strike a
RECORD DATE SHARES: line through the name(s) of the nominee(s). Your shares
will be voted for the remaining nominee(s).
In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
------------------------
Please be sure to date this proxy and Date IMPORTANT: Please sign exactly as your name(s) appear(s)
sign your name exactly as it appears above. to the left. In the case of joint holders, all should
- - -------------------------------------------------------------------- sign. When signing as an attorney, executor,
administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign in full
corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by
- - ---- Stockholder sign here ------------------Co-owner sign here----- authorized person.
DETACH CARD DETACH CARD
</TABLE>
TRIAD GUARANTY INC.
101 SOUTH STRATFORD ROAD, SUITE 500
WINSTON-SALEM, NORTH CAROLINA 27104
Dear Stockholder:
Your vote is important to us, and we encourage you to exercise your right to
vote your shares of common stock. On behalf of the Board of Directors, we urge
you to sign, date, and return the proxy card in the enclosed postage-paid
envelope as soon as possible.
We appreciate your confidence in us and your cooperation with this solicitation.
Sincerely,
Triad Guaranty Inc.
<PAGE> 20
[REVERSE SIDE]
TRIAD GUARANTY INC.
101 SOUTH STRATFORD ROAD
SUITE 500
WINSTON-SALEM, NORTH CAROLINA 27104
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The holder(s) signing on the reverse side hereby appoints William T. Ratliff,
III and David W. Whitehurst, or either of them, as attorneys and proxies, each
with the power to appoint a substitute, and hereby authorizes them to represent
and to vote, as designated on the reverse side, all the the shares of Common
Stock of Triad Guaranty Inc. (the "Company") held of record by such holder(s) on
April 1, 1999 at the Annual Meeting of Stockholders to be held on May 13, 1999,
or any adjournment thereof.
[ PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. ]
HAS YOUR ADDRESS CHANGED?
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- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
