WINSTON-SALEM, N.C., April 1 /PRNewswire-FirstCall/ -- Triad Guaranty Inc. (Nasdaq: TGIC) announced that the Illinois Director of Insurance (the 'Illinois Director') issued a Corrective Order, which we received today, impacting the Company's insurance subsidiaries, Triad Guaranty Insurance Corporation and Triad Guaranty Assurance Corporation (collectively, 'Triad'). Under the Order, effective June 1, 2009, or a later date established by the Illinois Director, all valid claims under Triad's mortgage guaranty insurance policies will be paid 60% in cash and 40% by the creation of a deferred payment obligation ('DPO'). The DPO will be represented by a separate entry in Triad's financial statements and will accrue a carrying charge based on the investment yield earned by Triad's investment portfolio. Payments of the carrying charge and the DPO will be subject to Triad's future financial performance and will require approval of the Illinois Director.

Ken Jones, President and CEO said, 'Continuing volatility in the housing and mortgage markets, a high incidence of fraud and noncompliance with underwriting programs in the loan origination process, as well as worsening conditions in the overall economy, make it very difficult to forecast Triad's future financial position and claims. Government-led initiatives, including the loan modification and refinancing initiatives announced this month by Fannie Mae and Freddie Mac, are unprecedented in scope and could have a significant, stabilizing impact on the key variables that typically drive the level of our future premiums and losses. While Triad continues to believe that it has sufficient resources to pay all current and future valid claims, there is more uncertainty today than when we entered run-off in July 2008. Because of this uncertainty, the Illinois Director has determined that it is in the best interests of Triad's policyholders to require Triad to settle claims with a combination of cash and deferred payment obligations, and has issued an Order to that effect.'

Mr. Jones continued, 'The significant and rapid decline in housing prices over the past two years, coupled with the ongoing recession, contributed to a high default rate in our insured loans. The reserves established on our financial statements to cover the expected future claims on these delinquencies resulted in large reported losses, which has significantly reduced our capital base.