<PAGE> 1
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
MAY 12, 1999
(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)
<PAGE> 2
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
May 3, 1999.
<PAGE> 3
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
(Registrant)
By:
------------------------------------------
John S. Heneghan
Vice President and Chief Financial Officer
Dated: May 12, 1999
<PAGE> 4
EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on May 3, 1999.
<PAGE> 1
CNA SURETY CORPORATION ANALYST CONTACT:
CNA Plaza John Heneghan
Chicago IL 60685 312-822-1908
[email protected]
MEDIA CONTACT:
Doreen Lubeck
773-583-4331
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
CNA SURETY ANNOUNCES 33% INCREASE
IN FIRST QUARTER NET INCOME
CHICAGO, May 3, 1999 -- CNA Surety Corporation (NYSE:SUR) today
reported strong earnings for the first quarter ended March 31, 1999, primarily
driven by increased premiums for surety bonds that support public construction
projects. Highlights of the 1999 first quarter results compared with the same
period in 1998 include:
- Net income increased 33 percent to $13.0 million, or 30 cents per
share, compared with $9.8 million, or 23 cents per share in 1998.
- Operating earnings, after income taxes, increased 30 percent to
$12.8 million, or 29 cents per share, from $9.8 million, or 23
cents per share in 1998.
- Net written premiums increased 12 percent to $69.4 million.
- Underwriting income increased 28 percent to $16.0 million.
- Combined ratio improved to 76.5 percent for the first quarter
ended March 31, 1999 compared with 78.7 percent in the first
quarter of 1998, and the loss ratio improved to 17.6 percent from
19.1 percent for the comparable period.
"We started 1999 very strongly with double digit growth in premiums
driven by continued strength in public construction. Net written premiums for
our core direct business grew 13 percent for the quarter, led by an 18 percent
increase in contract surety premiums," said Mark C. Vonnahme, President and
Chief Executive Officer of CNA Surety. "The robust contract premium growth
reflects increased volume from new accounts added during 1998 and continuing
healthy economic conditions for public construction nationwide. Although many
sectors of the contract portfolio have demonstrated growth, highway and road
construction has been particularly strong since Congressional passage of the
Transportation Equity Act for the 21st Century (TEA-21). TEA-21 authorized a 40
percent increase in total Federal funding for highway and transit systems to
over $200 billion in the six year period from 1998 to 2004."
-more-
<PAGE> 2
For the first quarter ended March 31, 1999, net income and operating
earnings per share were $0.30 and $0.29, respectively. Net income and operating
earnings per share for the first quarter ended March 31, 1998 were both 23
cents. For the first quarter ended March 31, 1999, net written premiums
increased 12 percent to $69.4 million. Excluding international reinsurance
business assumed from CNA Reinsurance Company, Limited (London), core direct net
written premiums increased 13 percent to $67.1 million for the quarter. Net
written premiums for contract surety increased 18 percent for the 1999 first
quarter to $29.7 million due to favorable economic conditions for public
construction nationwide, particularly in the highway/bridge sector where CNA
Surety continues to experience increased activity. Net written premiums for core
direct commercial surety increased 12 percent to $30.6 million, primarily
reflecting increased business with key national and regional distribution
partners.
Underwriting income for the 1999 first quarter increased $3.5 million,
or 28 percent, to $16.0 million. The company's loss and combined ratios were
17.6 percent and 76.5 percent, respectively, for the first quarter of 1999
compared with the loss and combined ratios for the comparable 1998 quarter of
19.1 percent and 78.7 percent, respectively. The loss and combined ratios for
the first quarter of 1999 include favorable loss reserve development of $1.7
million compared with favorable loss reserve development of $0.6 million for the
first quarter of 1998. The expense ratio decreased 0.7 percentage points to 58.9
percent in the first quarter of 1999 compared with the expense ratio of 59.6
percent in 1998, as net earned premiums increased 16 percent and related
operating expenses increased at a lower rate of 14 percent.
In April 1999, the company repurchased 10,375 shares of its common
stock pursuant to its share repurchase programs. Depending on market conditions,
shares may be purchased from time to time in the open market or otherwise.
CNA Surety Corporation is the largest publicly traded surety company in
the country. Through its principal subsidiaries, Western Surety Company and
Universal Surety of America, CNA Surety provides surety and fidelity bonds in
all 50 states through a combined network of approximately 37,000 independent
agencies. Visit us at www.cnasurety.com on the World Wide Web.
CNA is a registered service mark, trade name and domain name of CNA
Financial Corporation.
# # #
- -- 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 CNA Surety Corporation'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.
-2-
<PAGE> 3
CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING RESULTS:
Gross written premiums $ 71,524 $ 63,848
=========== ===========
Net written premiums $ 69,362 $ 61,836
=========== ===========
Revenues:
Net earned premiums $ 67,870 $ 58,745
Net investment income 6,341 6,789
Net investment gains 396 --
----------- -----------
Total revenues 74,607 65,534
----------- -----------
Expenses:
Net losses and loss adjustment expenses 11,914 11,218
Net commissions, brokerage and other underwriting expenses 39,978 35,039
Interest expense 1,489 1,821
Amortization of intangible assets 1,475 1,475
----------- -----------
Total expenses 54,856 49,553
----------- -----------
Income before income taxes 19,751 15,981
Income taxes 6,708 6,166
----------- -----------
NET INCOME $ 13,043 $ 9,815
=========== ===========
Basic earnings per common share $ 0.30 $ 0.23
=========== ===========
Diluted earnings per common share $ 0.30 $ 0.23
=========== ===========
Basic weighted average shares outstanding 44,100 43,348
=========== ===========
Diluted weighted average shares outstanding 44,213 43,570
=========== ===========
OPERATING EARNINGS, AFTER INCOME TAXES:
Net income $ 13,043 $ 9,815
Net investment gains (257) --
----------- -----------
OPERATING EARNINGS $ 12,786 $ 9,815
=========== ===========
DILUTED PER SHARE DATA:
Net income $ 0.30 $ 0.23
Net investment gains (0.01) --
----------- -----------
OPERATING EARNINGS $ 0.29 $ 0.23
=========== ===========
</TABLE>
--------------------------------------------------
See notes to Press Release Investor Data on page 4.
-3-
<PAGE> 4
CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
MARCH 31,
1999 1998
----------- -----------
<S> <C> <C>
UNDERWRITING RESULTS:
Net written premiums:
Contract $ 29,659 $ 25,240
Commercial 32,884 29,972
Fidelity and other 6,819 6,624
----------- -----------
$ 69,362 $ 61,836
=========== ===========
Net earned premiums $ 67,870 $ 58,745
Net losses and loss adjustment expenses(1) 11,914 11,218
Net commissions, brokerage and other underwriting expenses 39,978 35,039
----------- -----------
Underwriting income $ 15,978 $ 12,488
=========== ===========
Loss ratio (1) 17.6% 19.1%
Expense ratio 58.9 59.6
Combined ratio (1) ----------- -----------
76.5% 78.7%
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, December 31,
CONSOLIDATED BALANCE SHEET DATA: 1999 1998
----------- -----------
<S> <C> <C>
Invested assets and cash $ 500,156 $ 505,355
Intangible assets, net 154,586 156,062
Total assets 822,530 819,370
Insurance reserves 343,740 333,728
Long-term debt 100,000 113,000
Total stockholders' equity 316,671 309,897
Book value per share $ 7.18 $ 7.03
=========== ===========
Outstanding shares 44,101 44,093
=========== ===========
</TABLE>
----------------------------------------------------
NOTES TO PRESS RELEASE INVESTOR DATA
(1) 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 reductions, were $1,665, or
2.5%, and $581, or 1.0%, for the three months ending March 31, 1999
and 1998, respectively.
-4-
