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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
AUGUST 4, 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
August 2, 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: August 4, 1999
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EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on August 2, 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 15% INCREASE IN SECOND QUARTER NET INCOME
CHICAGO, August 2, 1999 -- CNA Surety Corporation (NYSE:SUR) today
reported higher operating earnings for the second quarter and six months ended
June 30, 1999, primarily driven by increased premiums for surety bonds that
support public construction projects. Highlights of the 1999 second quarter
results compared with the same period in 1998 include:
- Net income increased 15 percent to $12.8 million, or 29 cents per
share, compared with $11.2 million, or 25 cents per share, in 1998.
- Operating earnings, after income taxes, increased 15 percent to
$12.8 million, or 29 cents per share, from $11.1 million, or 25
cents per share, in 1998.
- Underwriting income increased 7 percent to $16.1 million.
- Net written premiums increased 4 percent to $76.2 million.
Mark C. Vonnahme, President and Chief Executive Officer, stated, "In
the second quarter, we continued to experience positive operating results
despite continued competition, particularly in the small contract and large
commercial account segments. We are experiencing strong growth in our standard
contract segment which combined with our core commercial business plus
opportunities in the international marketplace should enable us to achieve our
targeted annual growth rate of 6 to 9 percent under current market conditions."
For the six months ended June 30, 1999, net income increased 23 percent
to $25.9 million, or 59 cents per share, compared to $21.0 million, or 48 cents
per share, in 1998. Operating earnings, after income taxes, increased 22 percent
to $25.6 million, or 58 cents per share, from $20.9 million, or 48 cents per
share, in 1998. These increases in operating results were primarily attributable
to continued favorable underwriting activity. Operating earnings for the second
quarter and first half of 1999 also benefited from reduced interest expense and
higher after-tax investment income.
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For the second quarter of 1999, net written premiums increased 4
percent to $76.2 million. Excluding international reinsurance business assumed
from CNA Reinsurance Company, Limited (London), core direct net written premiums
increased 4 percent to $73.2 million for the quarter. Net written premiums for
contract surety increased 8 percent for the 1999 second quarter to $37.8 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 decreased 2 percent to $29.5 million, primarily due to a $1.5 million
decline in quarterly premiums for renewal business and continued competitive
conditions in the large commercial account segment. The decline in renewal
premiums was attributable to quarterly fluctuations in processing. The growth in
renewal premiums for the first half of 1999 was consistent with the 5 percent
growth for the core direct commercial book on a year to date basis. Net written
premiums for the first half of 1999 increased 8 percent to $145.5 million with
contract surety and commercial surety up 12 percent and 5 percent, respectively.
Underwriting income for the 1999 second quarter increased $1.1 million,
or 7 percent, to $16.1 million. The company's loss and combined ratios were 16.9
percent and 76.9 percent, respectively, for the second quarter of 1999 compared
with loss and combined ratios for the comparable 1998 quarter of 16.7 percent
and 76.3 percent, respectively. The loss and combined ratios for the second
quarter of 1999 include favorable loss reserve development of $2.4 million
compared with favorable loss reserve development of $1.1 million for the second
quarter of 1998. The expense ratio increased 0.4 percentage points to 60.0
percent in the second quarter of 1999 compared with the expense ratio of 59.6
percent in the comparable quarter of 1998, as operating expenses increased 11
percent and net earned premiums increased at a lower rate of 10 percent. The
increase in operating expenses for the quarter includes anticipated information
technology related expenditures and other costs related to back office
consolidation efforts.
For the first half of 1999, underwriting income increased $4.6 million,
or 17 percent, to $32.1 million. The loss and combined ratios were 17.2 percent
and 76.7 percent, respectively, for the first half of 1999, compared to 17.9
percent and 77.5 percent, respectively, for the same period in 1998. The loss
and combined ratios for the first half of 1999 and the comparable period of 1998
include favorable loss reserve development of $4.1 million and $1.7 million,
respectively. The expense ratio remained stable with a slight decrease of 0.1
percentage points to 59.5 percent for the first half of 1999.
Through July 30, 1999, the Company has repurchased 13,040 shares under
its share repurchase programs. 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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- -- 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.
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CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Gross written premiums $ 78,181 $ 75,145 $ 149,705 $ 138,993
=========== =========== =========== ===========
Net written premiums $ 76,173 $ 73,109 $ 145,535 $ 134,945
=========== =========== =========== ===========
Revenues:
Net earned premiums $ 69,688 $ 63,278 $ 137,558 $ 122,023
Net investment income 6,172 6,077 12,513 12,866
Net investment gains 24 44 420 44
----------- ----------- ----------- -----------
Total revenues 75,884 69,399 150,491 134,933
----------- ----------- ----------- -----------
Expenses:
Net losses and loss adjustment expenses 11,758 10,558 23,672 21,776
Net commissions, brokerage and
other underwriting 41,838 37,729 81,816 72,768
Interest expense 1,331 1,837 2,820 3,658
Amortization of intangible assets 1,475 1,475 2,950 2,950
----------- ----------- ----------- -----------
Total expenses 56,402 51,599 111,258 101,152
----------- ----------- ----------- -----------
Income before income taxes 19,482 17,800 39,233 33,781
Income taxes 6,644 6,643 13,352 12,809
----------- ----------- ----------- -----------
NET INCOME $ 12,838 $ 11,157 $ 25,881 $ 20,972
=========== =========== =========== ===========
Basic earnings per common share $0.29 $0.25 $0.59 $0.48
===== ====== ===== =====
Diluted earnings per common share $0.29 $0.25 $0.59 $0.48
===== ===== ===== =====
Basic weighted average shares outstanding 44,098 43,405 44,099 43,377
=========== =========== =========== ===========
Diluted weighted average shares outstanding 44,267 43,566 44,238 43,567
=========== =========== =========== ===========
OPERATING EARNINGS, AFTER INCOME TAXES:
Net income $ 12,838 $ 11,157 $ 25,881 $ 20,972
Net investment gains (16) (29) (273) (29)
------------ ------------ ------------ -----------
Operating earnings $ 12,822 $ 11,128 $ 25,608 $ 20,943
=========== =========== =========== ===========
DILUTED PER SHARE DATA:
Net income $0.29 $0.25 $0.59 $0.48
Net investment gains -- -- (.01) --
----- ----- ----- -----
OPERATING EARNINGS $0.29 $0.25 $0.58 $0.48
===== ===== ===== =====
</TABLE>
__________________________________________________
See notes to Press Release Investor Data on page 5.
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CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
UNDERWRITING RESULTS:
Net written premiums:
Contract $ 37,838 $ 35,092 $ 67,497 $ 60,332
Commercial 32,511 32,489 65,395 62,461
Fidelity and other 5,824 5,528 12,643 12,152
----------- ----------- ----------- -----------
$ 76,173 $ 73,109 $ 145,535 $ 134,945
=========== =========== =========== ===========
Net earned premiums $ 69,688 $ 63,278 $ 137,558 $ 122,023
Net losses and loss adjustment expenses (1) 11,758 10,558 23,672 21,776
Net commissions, brokerage and other
underwriting expenses 41,838 37,729 81,816 72,768
----------- ----------- ----------- -----------
Underwriting income $ 16,092 $ 14,991 $ 32,070 $ 27,479
=========== =========== =========== ===========
Loss ratio (1) 16.9% 16.7% 17.2% 17.9%
Expense ratio 60.0 59.6 59.5 59.6
----------- ----------- ----------- -----------
Combined ratio (1) 76.9% 76.3% 76.7% 77.5%
=========== ============ =========== ===========
JUNE 30, December 31,
CONSOLIDATED BALANCE SHEET DATA: 1999 1998
----------- -----------
Invested assets and cash $ 475,199 $ 505,355
Intangible assets, net 153,111 156,062
Total assets 822,046 819,370
Insurance reserves 350,551 333,728
Long-term debt 100,000 113,000
Total stockholders' equity 318,469 309,897
Book value per share $ 7.22 $ 7.03
=========== ===========
Outstanding shares 44,102 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 $2,448 or 3.5% and
$1,100 or 1.7% for three months ended June 30, 1999 and 1998 and $4,113 or
3.0 % and $1,681 or 1.4% for six months ended June 30, 1999 and 1998,
respectively.
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