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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
MAY 12, 2000
(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
May 8, 2000.
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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: May 12, 2000
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EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on May 8, 2000.
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EXHIBIT 99
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 10% Increase in First Quarter Operating Earnings and
14% Increase in Net Written Premiums
CHICAGO, May 8, 2000 -- CNA Surety Corporation (NYSE:SUR) today
reported double-digit growth in operating earnings and net written premiums for
the first quarter ended March 31, 2000. Premium growth for the quarter was
particularly strong in the contract segment, driven by increased public
construction nationwide. Highlights of the first quarter 2000 results compared
with the same period in 1999 include:
- Operating earnings, after income taxes, increased 10 percent to
$14.1 million, or 33 cents per share, from $12.8 million, or 29
cents per share, in 1999.
- Net income increased 8 percent to $14.1 million, or 33 cents per
share, compared to $13.0 million, or 30 cents per share, in 1999.
- Net written premiums increased 14 percent to $79.2 million and
contract surety premiums increased 21 percent.
- Underwriting income increased 8 percent to $17.3 million.
- The combined ratio was 77.1 percent for the first quarter ended
March 31, 2000 compared with 76.5 percent in the first quarter of
1999.
"We continue to take great pride in our strong operating and financial
results. In the first quarter, net written premiums for our core direct business
grew 14 percent, led by a 21 percent increase in contract surety" said Mark C.
Vonnahme, President and Chief Executive Officer of CNA Surety. "The generally
robust public construction markets together with our positive new account
activity over the last two years contributed to our strong contract growth. In
addition, our distribution partners have responded very favorably to our new
value added service offerings, such as our internally developed bONdLINE(R)
system and SurePath(TM) product available through our alliance with InSure
Vision Technologies, LLC. These Internet-based solutions and other service
offerings are making it easier for agents and brokers to efficiently transact
business with CNA Surety".
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For the first quarter ended March 31, 2000, net income increased 8
percent to $14.1 million, or 33 cents per share, compared to $13.0 million, or
30 cents per share, in 1999. Operating earnings, after income taxes, increased
10 percent to $14.1 million, or 33 cents per share, from $12.8 million, or 29
cents per share, in 1999. These increases in operating earnings were primarily
attributable to underwriting results as described below and a 14% increase in
investment income resulting from higher average invested assets and general
interest rate increases.
For the first quarter ended March 31, 2000, net written premiums
increased 14 percent to $79.2 million with contract surety up 21 percent and
commercial surety up 7 percent. Continued strong demand for domestic contract
surety products was supplemented by increased direct international contract
premium of $3.0 million for the quarter. The commercial surety premium increase
for the quarter reflects increased volume particularly in the small commercial
segment. International commercial reinsurance business increased $0.8 million
to $3.0 million.
Underwriting income for the first quarter ended March 31, 2000
increased $1.3 million, or 8 percent, to $17.3 million. The Company's loss and
combined ratios were 17.9 percent and 77.1 percent, respectively, for the first
quarter of 2000 compared with loss and combined ratios for the comparable 1999
quarter of 17.6 percent and 76.5 percent, respectively. The loss and combined
ratios for the first quarter of 2000 include favorable loss reserve development
of $2.1 million compared with favorable loss reserve development of $1.7 million
for the first quarter of 1999. The expense ratio increased slightly to 59.2
percent in the first quarter of 2000 compared with the expense ratio of 58.9
percent in the comparable quarter of 1999.
Through March 31, 2000, the Company has repurchased approximately 1.2
million of its shares at an aggregate cost of $13.0 million. Further repurchase
activity has been suspended pending resolution of the proposed tender offer by
Continental Casualty Company for the remaining CNA Surety common stock that
Continental Casualty and its affiliates do not own.
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.
InSure Vision Technologies, LLC is the developer of SurePath(TM), a
single entry, multi-use automated surety bond processing system which operates
over the Internet.
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CNA SURETY CORPORATION
Press Release Investor Data
{Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
OPERATING RESULTS:
Gross written premiums $ 80,655 $ 71,524
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Net written premiums $ 79,179 $ 69,362
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Revenues:
Net earned premiums $ 75,687 $ 67,870
Net investment income 7,201 6,341
Net realized investment gains (losses) (4) 396
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Total revenues $ 82,884 $ 74,607
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Expenses:
Net losses and loss adjustment expenses 13,572 11,914
Net commissions, brokerage and
other underwriting expenses 44,808 39,978
Interest expense 1,621 1,489
Amortization of intangible assets 1,525 1,475
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Total expenses 61,526 54,856
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Income before income taxes 21,358 19,751
Income taxes 7,245 6,708
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NET INCOME $ 14,113 $ 13,043
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Basic earnings per common share $ 0.33 $0.30
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Diluted earnings per common share $ 0.33 $0.30
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Basic weighted average shares outstanding 42,962 44,100
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Diluted weighted average shares outstanding 43,065 44,213
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OPERATING EARNINGS, AFTER INCOME TAXES:
Net income $ 14,113 $ 13,043
Net investment (gains) losses 3 (257)
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Operating earnings $ 14,116 $ 12,786
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DILUTED PER SHARE DATA:
Net income $ 0.33 $ 0.30
Net realized investment (gains) losses - (0.01)
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OPERATING EARNINGS $ 0.33 $ 0.29
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</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
MARCH 31,
---------------------------
2000 1999
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<S> <C> <C>
UNDERWRITING RESULTS:
Net written premiums:
Contract $ 35,930 $ 29,659
Commercial 35,315 32,884
Fidelity and other 7,934 6,819
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$ 79,179 $ 69,362
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Net earned premiums $ 75,687 $ 67,870
Net losses and loss adjustment expenses(1) 13,572 11,914
Net commissions, brokerage and other
underwriting expenses 44,808 39,978
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Underwriting income $ 17,307 $ 15,978
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Loss ratio(1) 17.9% 17.6%
Expense ratio 59.2 58.9
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Combined ratio(1) 77.1% 76.5%
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<CAPTION>
MARCH 31, December 31,
CONSOLIDATED BALANCE SHEET DATA: 2000 1999
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<S> <C> <C>
Invested assets and cash $ 534,315 $ 499,400
Intangible assets, net 154,455 155,980
Total assets 900,676 851,575
Insurance reserves 365,537 357,233
Long-term debt 101,900 101,900
Total stockholders' equity 337,956 326,304
Book value per share $ 7.88 $ 7.59
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Outstanding shares 42,896 43,006
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</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 $2,101 or 2.8% and
$1,665 or 2.5% for three months ended March 31, 2000 and 1999,
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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