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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
MARCH 3, 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
February 22, 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: March 3, 2000
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EXHIBIT INDEX
Exhibit No.
99. CNA Surety Corporation Press Release issued on February 22, 2000.
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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 24% INCREASE IN FISCAL 1999 NET INCOME AND AN 18% INCREASE
IN FOURTH QUARTER NET INCOME
CHICAGO, February 22, 2000 -- CNA Surety Corporation (NYSE:SUR) today
reported double-digit growth in net income, operating earnings, net written
premiums and underwriting income for the year and fourth quarter ended December
31, 1999. These exceptional results were driven by increased domestic and
international premiums for contract surety bonds and continued profitable
underwriting activity. Highlights of the fiscal 1999 results compared with the
same period in 1998 include:
- Net income increased 24 percent to $56.5 million, or $1.28 per
share, compared with $45.5 million, or $1.04 per share, in 1998.
- Operating earnings, after income taxes, increased 26 percent to
$56.5 million, or $1.28 per share, from $45.0 million, or $1.03
per share, in 1998.
- Net written premiums increased 10 percent to $299.0 million. o
Underwriting income increased 16 percent to $71.9 million.
- The combined ratio declined to 74.6 percent for the full year of
1999 and the loss ratio improved to 15.7 percent from 17.4
percent.
Mark C. Vonnahme, President and Chief Executive Officer, stated, "We
finished our second full year of operations as a public company with impressive
full year and fourth quarter operating results. Net written premiums grew 10
percent for the year and 13 percent for the quarter, significantly outperforming
the historical industry growth rate and exceeding our targeted annual growth
rate of 6 to 9 percent. These outstanding results reflect successful execution
of our core growth strategies of leveraging our broad product and distribution
resources and increasing CNA Surety's global presence."
"In addition to achieving favorable operating and underwriting results,
we also focused on enhancing shareholder value through prudent capital
management. In 1999, we repurchased 1.1 million common shares of the Company. We
continue to view share repurchases at the current market price as an attractive
use of capital."
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For the fourth quarter ended December 31, 1999, net income increased 18
percent to $15.4 million, or 35 cents per share, compared to $13.1 million, or
30 cents per share, in 1998. Operating earnings, after income taxes, increased
24 percent to $15.7 million, or 36 cents per share, from $12.7 million, or 29
cents per share, in 1998. These increases in operating results were primarily
attributable to continued profitable underwriting activity. Operating earnings
per share for the fourth quarter and year ended December 31, 1999 also benefited
from higher after-tax investment income, reduced interest expense and share
repurchase activity.
For the full year of 1999, net written premiums increased 10 percent to
$299.0 million. Excluding international reinsurance business assumed from CNA
Reinsurance Company, Limited (London), direct net written premiums increased 10
percent to $287.7 million for the year. Net written premiums for contract surety
increased $18.5 million, or 15 percent, for the year to $145.6 million. This
increase was due to favorable economic conditions for public construction
nationwide and an increase of $8.0 million in direct international premium to
$8.7 million. Net written premiums for direct commercial surety increased $6.9
million, or 6 percent, to $117.6 million. International commercial reinsurance
business increased 13 percent to $11.3 million.
For the year ended December 31, 1999, underwriting income increased
$10.1 million, or 16 percent, to $71.9 million. The loss and combined ratios
were 15.7 percent and 74.6 percent, respectively, for the year ended December
31, 1999, compared to 17.4 percent and 76.1 percent, respectively, for the same
period in 1998. The loss and combined ratios for the year ended December 31,
1999 and the comparable period of 1998 include favorable loss reserve
development of $13.1 million and $4.4 million, respectively. The expense ratio
remained relatively unchanged at 58.9 percent for the year ended December 31,
1999 compared with the expense ratio of 58.7 percent for the year ended December
31, 1998.
For the fourth quarter ended December 31, 1999, net written premiums
increased 13 percent to $74.5 million with contract surety and commercial surety
both up 13 percent. Contract surety premium growth includes increased direct
international contract premium of $1.6 million for the quarter. The commercial
surety premium increase for the quarter reflects positive new and renewal
account activity and approximately $1.0 million in non-recurring premiums
associated with large court bond obligations. International commercial
reinsurance business increased 20 percent to $3.0 million.
Underwriting income for the 1999 fourth quarter increased $1.9 million,
or 11 percent, to $19.9 million. The Company's loss and combined ratios were
15.6 percent and 73.1 percent, respectively, for the fourth quarter of 1999
compared with loss and combined ratios for the comparable 1998 quarter of 15.9
percent and 73.1 percent, respectively. The loss and combined ratios for the
fourth quarter of 1999 include favorable loss reserve development of $4.2
million compared with favorable loss reserve development of $2.4 million for the
fourth quarter of 1998. The expense ratio increased slightly to 57.5 percent in
the fourth quarter of 1999 compared with the expense ratio of 57.2 percent in
the comparable quarter of 1998.
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Through December 31, 1999, the Company has repurchased approximately
1.1 million of its shares at an aggregate cost of $11.8 million. 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--
CNA SURETY CORPORATION
Press Release Investor Data
Amounts in thousands, except per share data}
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING RESULTS:
Gross written premiums $ 76,436 $ 67,348 $ 306,859 $ 278,224
========= ========= ========= =========
Net written premiums $ 74,484 $ 65,786 $ 298,987 $ 270,602
========= ========= ========= =========
Revenues:
Net earned premiums $ 73,973 $ 66,933 $ 283,540 $ 258,737
Net investment income 6,950 6,027 25,850 24,259
Net investment gains (losses) (411) 622 15 844
--------- --------- --------- ---------
Total revenues 80,512 $ 73,582 $ 309,405 $ 283,840
--------- --------- --------- ---------
Expenses:
Net losses and loss adjustment expenses 11,553 10,670 44,672 44,998
Net commissions, brokerage and
other underwriting 42,497 38,254 166,974 151,966
Interest expense 1,562 1,713 5,846 7,218
Amortization of intangible assets 1,524 1,475 5,982 5,900
--------- --------- --------- ---------
Total expenses 57,136 52,112 223,474 210,082
--------- --------- --------- ---------
Income before income taxes 23,376 21,470 85,931 73,758
Income taxes 7,963 8,409 29,433 28,243
--------- --------- --------- ---------
NET INCOME $ 15,413 $ 13,061 $ 56,498 $ 45,515
========= ========= ========= =========
Basic earnings per common share $ 0.35 $ 0.30 $ 1.28 $ 1.04
========= ========= ========= =========
Diluted earnings per common share $ 0.35 $ 0.30 $ 1.28 $ 1.04
========= ========= ========= =========
Basic weighted average shares outstanding 43,602 44,090 43,974 43,722
========= ========= ========= =========
Diluted weighted average shares outstanding 43,806 44,203 44,120 43,875
========= ========= ========= =========
OPERATING EARNINGS, AFTER INCOME TAXES:
Net income $ 15,413 $ 13,061 $ 56,498 $ 45,515
Net investment (gains) losses 267 (404) (10)
--------- --------- --------- ---------
(549)
Operating earnings $ 15,680 $ 12,657 $ 56,488 $ 44,966
========= ========= ========= =========
DILUTED PER SHARE DATA:
Net income $ 0.35 $ 0.30 $ 1.28 $ 1.04
Net investment (gains) losses 0.01 (0.01) -- (0.01)
--------- --------- --------- ---------
OPERATING EARNINGS $ 0.36 $ 0.29 $ 1.28 $ 1.03
========= ========= ========= =========
</TABLE>
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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 YEARS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
UNDERWRITING RESULTS:
Net written premiums:
Contract $ 35,650 $ 31,564 $145,616 $127,114
Commercial 32,717 28,915 128,834 120,638
Fidelity and other 6,117 5,307 24,537 22,850
-------- -------- -------- --------
$ 74,484 $ 65,786 $298,987 $270,602
======== ======== ======== ========
Net earned premiums $ 73,973 $ 66,933 $283,540 $258,737
Net losses and loss adjustment expenses (1) 11,553 10,670 44,672 44,998
Net commissions, brokerage and other
underwriting expenses 42,497 38,254 166,974 151,966
-------- -------- -------- --------
Underwriting income $ 19,923 $ 18,009 $ 71,894 $ 61,773
======== ======== ======== ========
Loss ratio (1) 15.6% 15.9% 15.7% 17.4%
Expense ratio 57.5 57.2 58.9 58.7
-------- -------- -------- --------
Combined ratio (1) 73.1% 73.1% 74.6 % 76.1%
======== ======== ======== ========
DECEMBER 31, December 31,
CONSOLIDATED BALANCE SHEET DATA: 1999 1998
------------ ------------
Invested assets and cash $499,400 $505,355
Intangible assets, net 155,980 156,062
Total assets 851,575 819,370
Insurance reserves 357,233 333,728
Long-term debt 101,900 113,000
Total stockholders' equity 326,304 309,897
Book value per share $ 7.59 $ 7.03
======== ========
Outstanding shares 43,006 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 $4,244 or
5.7% and $2,410 or 3.6% for three months ended December 31, 1999 and
1998 and $13,085 or 4.6% and $4,352 or 1.7% for twelve months ended
December 31, 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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