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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
NOVEMBER 14, 1997
(Date of Report)
CNA SURETY CORPORATION
(Exact name of Registrant as specified in its charter)
1-13277
(Commission File No.)
DELAWARE 34-4144905
(State or other jurisdiction) (IRS Employer Identification No.)
CNA PLAZA, CHICAGO, ILLINOIS 60685
(Address of principal executive offices) (Zip code)
(312) 822-5000
(Registrant's telephone number, include area code)
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ITEM 5. OTHER EVENTS
See Exhibit 99 to this Form 8-K
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit 99 - CNA Surety Corporation Press Release
issued on November 4, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CNA SURETY CORPORATION
By: /s/ John S. Heneghan
-------------------------------------------
John S. Heneghan
Vice President and Chief Financial Officer
Dated: November 14, 1997
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EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on November 4, 1997
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FOR IMMEDIATE RELEASE EXHIBIT 99
ANALYST CONTACT: MEDIA CONTACT:
John S. Heneghan Joe Kopec
CNA Surety Corporation The Dilenschneider Group
312-822-1908 312-553-0700
CNA SURETY REPORTS STRONG UNDERWRITING RESULTS
CHICAGO, ILLINOIS, NOVEMBER 4, 1997 -- CNA SURETY CORPORATION (NYSE:SUR)
today reported strong underwriting results for the third quarter and nine
months ended September 30, 1997 for the separate surety businesses of both CNA
Financial Corporation ("CNA") and of Capsure Holdings Corp. ("Capsure"). The
merger that formed CNA Surety Corporation was completed on September 30, 1997,
combining the surety business of CNA with Capsure's principal insurance
subsidiaries, Western Surety Company and Universal Surety of America. The
combined operating results of these merged businesses will be reported
prospectively in CNA Surety's consolidated results from the closing date.
"Despite heightened competitive conditions in a number of market segments,
the year-to-date underwriting profitability of both surety businesses was
excellent," said Mark C. Vonnahme, president and CEO of CNA Surety. "Net
written premiums of the combined surety businesses of CNA and Capsure were up
4.4 percent for the nine months. In addition, favorable loss trends persist at
both businesses. We are in the early stages of integrating these complementary
business units and are excited about the long-term potential of CNA Surety."
Net written premiums of the surety business of CNA were up 8.5 percent in
the 1997 third quarter to $39.9 million. For the first nine months of 1997,
net written premiums were $108.6 million up 2.2 percent. Net written premiums
for the twelve months ended September 30, 1997 were $146.3 million.
The combined ratio for the surety business of CNA in the first nine months
of 1997 improved to 44.4 percent compared to 74.4 percent in 1996. For the
first nine months of 1997, the loss ratio declined to (10.6) percent compared
to 21.0 percent for 1996. The loss and combined ratios for the first nine
months of 1997 included $35.0 million in favorable loss reserve development
compared to $8.5 million for the comparable period of 1996. For the first nine
months of 1997, the expense ratio increased to 55.0 percent compared to 53.4
percent in 1996.
Capsure's net written premiums in the 1997 third quarter were up 9.7
percent to $24.1 million.
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EXHIBIT 99
For the first nine months of 1997, net written premiums were $74.4 million up
7.7 percent. Net written premiums for the twelve months ended September 30,
1997 were $96.6 million.
The combined ratio for Capsure in the first nine months of 1997 improved
to 77.2 percent compared to 80.3 percent in 1996. For the first nine months of
1997, the loss ratio declined to 7.2 percent compared to 10.0 percent for 1996.
The loss and combined ratios for the first nine months of 1997 included $5.2
million in favorable loss reserve development compared to $3.3 million for the
comparable period of 1996. For the first nine months of 1997, the expense
ratio decreased slightly to 70.0 percent compared to 70.3 percent in 1996.
CNA, through its subsidiaries, is the majority stockholder of CNA Surety,
owning 61.75 percent of the outstanding shares. Capsure stockholders own the
remaining 38.25 percent of the outstanding CNA Surety shares issued in the
tax-free exchange of their Capsure shares on a one-for-one basis. As described
in the Company's Registration Statement on Form S-4, these ownership
percentages may be adjusted on March 31, 1998 if the 1997 net written premiums
of Capsure or of the surety business of CNA deviate from specified levels.
CNA Surety Corporation, through its principal subsidiaries, Western Surety
Company and Universal Surety of America, provides surety and fidelity bonds in
all 50 states through a combined network of approximately 120,000 independent
agents.
CNA is a registered service mark and trade name of CNA Financial
Corporation.
# # #
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EXHIBIT 99
- -- Chart Follows--
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements which are not historical facts contained in this
release are forward-looking statements that involve risks and uncertainties,
including, but not limited to, product and policy demand and market response
risks, the effect of economic conditions, the impact of competitive products,
policies and pricing, product and policy development, regulatory changes and
conditions, rating agency policies and practices, development of claims and the
effect on loss reserves, the performance of reinsurance companies under
reinsurance contracts with the Company, investment portfolio developments and
reaction to market conditions, the results of financing efforts, the actual
closing of contemplated transactions and agreements, the effect of the
Company's accounting policies, and other risks detailed in the Company's
Securities and Exchange Commission filings. No assurance can be given that the
actual results of operations and financial condition will conform to the
forward-looking statements contained herein.
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NOTES TO PRESS RELEASE INVESTOR DATA
(1) Includes the surety operations of Continental Casualty Company ("CCC"),
Continental Insurance Company ("CIC") and their affiliates, collectively
referred to as CCC Surety Operations. CCC was the principal operating
subsidiary of CNA Financial Corporation ("CNA") which wrote the surety
line of business.
(2) Does not include the effects of certain general and administrative
expenses, which are indirect or overhead in nature, since such costs were
not historically allocated to the CCC Surety Operations of CNA or its
subsidiaries. Accordingly, the comparability of this data to other data
that include such costs is affected.
(3) Includes the effect of recording revisions of prior year reserves. The
dollar amount and the percentage point effect on the loss ratio of these
reserve revisions, all of which were deductions, were $6,905 or 18.3% for
the three months ending September 30, 1996 and $35,000 or 32.2% and $8,510
or 7.6% for the nine months ending September 30, 1997 and 1996,
respectively.
(4) Includes the results of operations of Western Surety and Universal
Surety, which principally relates to surety and fidelity lines and
excludes corporate and other similar expenses of Capsure.
(5) The receivable from affiliates reflects the reinsurance agreement whereby
CCC and CIC ceded all of their net unearned premiums and loss and loss
adjustment reserves, as of September 30, 1997, to Western Surety on the
merger date. On October 1, 1997, CNA Surety received payment from CNA for
the $118 million receivable from affiliates.
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CNA SURETY CORPORATION EXHIBIT 99
Press Release Investor Data
{Unaudited, amounts in thousands, except per share data}
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ---------------------------
1997 1996 1997 1996
-------- ------- -------- --------
<S> <C> <C> <C> <C>
SURETY BUSINESS OF CNA FINANCIAL
UNDERWRITING DATA:(1)
Net written premiums $39,865 $36,726 $108,630 $106,263
Net earned premiums $38,580 $37,769 $108,564 $112,302
Net losses and loss adjustment expenses 8,222 3,716 (11,516) 23,612
Net commissions, brokerage and other (2) 20,004 20,581 59,674 59,995
-------- ------- -------- --------
Underwriting income $10,354 $13,472 $60,406 $28,695
======== ======= ======== ========
Loss ratio (3) 21.3% 9.8% (10.6)% 21.0%
Expense ratio 51.9 54.5 55.0 53.4
-------- ------- -------- --------
Combined ratio (3) 73.2% 64.3% 44.4% 74.4%
======== ======= ======== ========
CAPSURE SURETY UNDERWRITING DATA:(4)
Net written premiums $24,082 $21,947 $74,448 $69,115
Net earned premiums $24,170 $22,856 $69,428 $66,159
Net losses and loss adjustment expenses 1,871 2,014 5,030 6,601
Net commissions, brokerage and other 17,309 16,177 48,595 46,499
-------- ------- -------- --------
Underwriting income $4,990 $4,665 $15,803 $13,059
======== ======= ======== ========
Loss ratio 7.8% 8.8% 7.2% 10.0%
Expense ratio 71.6 70.8 70.0 70.3
-------- ------- -------- --------
Combined ratio 79.4% 79.6% 77.2% 80.3%
======== ======= ======== ========
CNA SURETY CORPORATION SEPTEMBER 30,
CONSOLIDATED BALANCE SHEET DATA: 1997
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Invested assets and cash $ 267,876
Receivable from affiliates (5) 117,982
Intangible assets 165,562
Total assets 683,314
Insurance reserves 286,884
Long-term debt 105,000
Stockholders' equity 255,071
Book value per share $5.89
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Outstanding shares 43,294
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See notes to Press Release Investor Data on previous page.
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