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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 11, 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)
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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 1, 1999.
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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
(Registrant)
By: /s/ John S. Heneghan
-------------------------------------------
John S. Heneghan
Vice President and Chief Financial Officer
Dated: November 11, 1999
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EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on November 1, 1999.
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CNA SURETY CORPORATION ANALYST CONTACT:
CNA Plaza John Heneghan
Chicago IL 60685 312-822-1908
[email protected]
MEDIA CONTACT:
Doreen Lubeck
773-583-4331
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FOR IMMEDIATE RELEASE
CNA SURETY ANNOUNCES 32% INCREASE IN THIRD QUARTER NET INCOME
CHICAGO, November 1, 1999 -- CNA Surety Corporation (NYSE:SUR) today
reported higher operating earnings for the third quarter ended September 30,
1999, driven by increased premiums for surety bonds that support public
construction projects and continued favorable loss experience. Highlights of the
1999 third quarter results compared with the same period in 1998 include:
- - Net income increased 32 percent to $15.2 million, or 34 cents per
share, compared with $11.5 million, or 26 cents per share, in 1998.
- - Operating earnings, after income taxes, increased 34 percent to
$15.2 million, or 34 cents per share, from $11.4 million, or 26 cents
per share, in 1998.
- - Net written premiums increased 13 percent to $79.0 million.
- - Underwriting income increased 22 percent to $19.9 million.
- - Combined ratio improved to 72.4 percent for the third quarter of
1999 compared to 76.7 percent in 1998, and the loss ratio improved to
13.1 percent from 18.0 percent.
Mark C. Vonnahme, President and Chief Executive Officer, stated, "Our
third quarter operating results continued to demonstrate our competitive
advantages with record levels of quarterly revenue and operating earnings. Net
written premium growth of 13% for the quarter reflects the diversity of our
product portfolio led by significant expansion internationally and continued
strength in our standard contract business. CNA Surety has consistently
delivered highly profitable underwriting results. Our combined ratio improved to
72.4 percent for the quarter as generally favorable loss experience continued."
For the nine month period ended September 30, 1999, net income
increased 27 percent to $41.1 million, or 93 cents per share, compared to $32.5
million, or 74 cents per share, in 1998. Operating earnings, after income taxes,
increased 26 percent to $40.8 million, or 92 cents per share, from $32.3
million, or 74 cents per share, in 1998. These increases in operating results
were primarily attributable to continued profitable underwriting activity.
Operating earnings for the third quarter and nine months ended September 30,
1999 also benefited from higher after-tax investment income and reduced interest
expense.
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For the third quarter of 1999, net written premiums increased 13
percent to $79.0 million. Excluding international reinsurance business assumed
from CNA Reinsurance Company, Limited (London), core direct net written premiums
increased 13 percent to $76.0 million for the quarter. Net written premiums for
contract surety increased $7.3 million, or 21 percent, for the 1999 third
quarter to $42.5 million. The $7.3 million increase was due to favorable
economic conditions for public construction nationwide and an increase of $4.4
million of direct international premium. Net written premiums for core direct
commercial surety increased 4 percent to $27.7 million. Net written premiums for
the nine months ended September 30, 1999 increased 10 percent to $224.5 million
with contract surety and commercial surety up 15 percent and 5 percent,
respectively.
Underwriting income for the 1999 third quarter increased $3.6 million,
or 22 percent, to $19.9 million. The company's loss and combined ratios were
13.1 percent and 72.4 percent, respectively, for the third quarter of 1999
compared with loss and combined ratios for the comparable 1998 quarter of 18.0
percent and 76.7 percent, respectively. The loss and combined ratios for the
third quarter of 1999 include favorable loss reserve development of $4.7 million
compared with favorable loss reserve development of $0.3 million for the third
quarter of 1998. The expense ratio increased 0.6 percentage points to 59.3
percent in the third quarter of 1999 compared with the expense ratio of 58.7
percent in the comparable quarter of 1998, as operating expenses increased 4
percent and net earned premiums increased at a lower rate of 3 percent.
For the nine months ended September 30, 1999, underwriting income
increased $8.2 million, or 19 percent, to $52.0 million. The loss and combined
ratios were 15.8 percent and 75.2 percent, respectively, for the nine months
ended September 30, 1999, compared to 17.9 percent and 77.2 percent,
respectively, for the same period in 1998. The loss and combined ratios for the
nine months ended September 30, 1999 and the comparable period of 1998 include
favorable loss reserve development of $8.8 million and $1.9 million,
respectively. The expense ratio remained stable with a slight increase of 0.1
percentage points to 59.4 percent for the nine months ended September 30, 1999.
Through October 31, 1999, the Company has repurchased approximately
532,000 of its shares at an aggregate cost of $6.0 million under its share
repurchase program. Depending on market conditions, additional 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.
# # #
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CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Gross written premiums $ 80,718 $ 71,883 $ 230,423 $ 210,876
======== ======== ======== ========
Net written premiums $ 78,968 $ 69,871 $ 224,503 $ 204,816
======== ======== ======== ========
Revenues:
Net earned premiums $ 72,009 $ 69,781 $ 209,567 $ 191,804
Net investment income 6,387 5,366 18,900 18,232
Net investment gains 6 178 426 222
-------- -------- -------- --------
Total revenues 78,402 $ 75,325 $ 228,893 $ 210,258
-------- -------- -------- --------
Expenses:
Net losses and loss adjustment expenses 9,447 12,552 33,119 34,328
Net commissions, brokerage and
other underwriting 42,661 40,944 124,477 113,712
Interest expense 1,464 1,847 4,284 5,505
Amortization of intangible assets 1,508 1,475 4,458 4,425
-------- -------- -------- --------
Total expenses 55,080 56,818 166,338 157,970
-------- -------- -------- --------
Income before income taxes 23,322 18,507 62,555 52,288
Income taxes 8,118 7,025 21,470 19,834
-------- -------- -------- --------
NET INCOME $ 15,204 $ 11,482 $ 41,085 $ 32,454
======== ======== ======== ========
Basic earnings per common share $0.34 $0.26 $ 0.93 $0.74
======= ===== ====== =====
Diluted earnings per common share $0.34 $0.26 $ 0.93 $0.74
======= ===== ====== =====
Basic weighted average shares outstanding 44,102 44,033 44,100 43,598
======== ======== ======== ========
Diluted weighted average shares outstanding 44,261 44,155 44,245 43,764
======== ======== ======== ========
OPERATING EARNINGS, AFTER INCOME TAXES:
Net income $ 15,204 $ 11,482 $ 41,085 $ 32,454
Net investment gains (4) (116) (277) (144)
-------- -------- -------- -------
Operating earnings $ 15,200 $ 11,366 $ 40,808 $ 32,310
======== ======== ======== ========
DILUTED PER SHARE DATA:
Net income $ 0.34 $0.26 $0.93 $ 0.74
Net investment gains -- -- (0.01) --
------ ------ --------- -------
OPERATING EARNINGS $ 0.34 $0.26 $0.92 $ 0.74
======= ====== ======= =======
</TABLE>
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See notes to Press Release Investor Data on page 4.
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CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
UNDERWRITING RESULTS:
Net written premiums:
Contract $ 42,469 $ 35,218 $ 109,966 $ 95,550
Commercial 30,722 29,262 96,117 91,723
Fidelity and other 5,777 5,391 18,420 17,543
----------- ----------- ----------- -----------
$ 78,968 $ 69,871 $ 224,503 $ 204,816
=========== =========== =========== ===========
Net earned premiums $ 72,009 $ 69,781 $ 209,567 $ 191,804
Net losses and loss adjustment expenses (1) 9,447 12,552 33,119 34,328
Net commissions, brokerage and other
underwriting expenses 42,661 40,944 124,477 113,712
----------- ----------- ----------- -----------
Underwriting income $ 19,901 $ 16,285 $ 51,971 $ 43,764
=========== =========== =========== ===========
Loss ratio (1) 13.1% 18.0% 15.8% 17.9%
Expense ratio 59.3 58.7 59.4 59.3
----------- ----------- ----------- -----------
Combined ratio (1) 72.4% 76.7% 75.2 % 77.2%
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
CONSOLIDATED BALANCE SHEET DATA: 1999 1998
----------- -----------
<S> <C> <C>
Invested assets and cash $ 517,074 $ 505,355
Intangible assets, net 157,504 156,062
Total assets 844,371 819,370
Insurance reserves 348,954 333,728
Long-term debt 101,900 113,000
Total stockholders' equity 326,915 309,897
Book value per share $ 7.42 $ 7.03
======= ========
Outstanding shares 44,077 44,093
======= ========
</TABLE>
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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 $4,728 or
6.6% and $261 or 0.4% for three months ended September 30, 1999 and
1998 and $8,841 or 4.2% and $1,942 or 1.0% for nine months ended
September 30, 1999 and 1998, respectively.
"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.
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