CNA Surety Announces First Quarter 2001 Earnings

Apr 30, 2001, 01:00 ET from CNA Surety Corporation

    CHICAGO, April 30 /PRNewswire/ -- CNA Surety Corporation (NYSE:   SUR)
 today reported lower profits for the first quarter ended March 31, 2001.
 Operating earnings for the first quarter of 2001 decreased $2.1 million to
 $12.0 million, or $0.28 per share, from $14.1 million, or $0.33 per share, for
 the same period in 2000.  Net income was $11.9 million, or $0.28 per share,
 compared to $14.1 million, or $0.33 per share, in 2000.  First quarter
 operating earnings and net income reflect lower underwriting income partially
 offset by the impact of higher investment income.  Underwriting income
 declined $3.5 million, or twenty percent, primarily due to adverse loss
 experience.  For the first quarter of 2001, the Company's combined ratio was
 82.0 percent.  Investment income increased seven percent to $7.7 million.
     "Underwriting results for the first quarter of 2001 were consistent with
 our expectations given present economic conditions and the changes in the
 business," said Mark C. Vonnahme, President and Chief Executive Officer of CNA
 Surety.  "As anticipated, gross production trends remained positive for
 contract surety with processed premiums up six percent for the quarter.
 Difficult market conditions persist in commercial surety, primarily large
 account business.  Even with CNA Surety's strong underwriting tradition,
 adverse loss trends in more recent accident years and the associated impact on
 the cost of reinsurance remain important risk considerations for our business.
 Our diversified product portfolio continues to provide balance to our
 underwriting results and overall we are pleased with the results for the
 quarter."
     Effective January 1, 2001, the Company began delaying the recording of
 written premium until the effective date of the bond, rather than recording on
 the date the bond is processed ("processed premium").  This change did not
 impact the recognition of net earned premium but did impact gross written
 premiums.  For the first quarter of 2001, gross written premiums decreased six
 percent to $75.5 million.  First quarter gross written premiums reflect the
 unfavorable impact of the change in the timing of recording written premiums
 of $7.9 million and the discontinuance of the CNA Re assumed international
 credit and surety business of $3.0 million.  Excluding international
 reinsurance business assumed from CNA Re, core direct gross processed premiums
 increased seven percent to $83.3 million.
     Gross written premiums for contract surety increased two percent for the
 quarter to $38.3 million.  Gross processed premiums for contract surety
 increased six percent for the quarter to $39.7 million.  These increases are
 primarily due to continued strength in public construction spending.  Gross
 written premiums for core direct commercial surety decreased eleven percent to
 $29.0 million.  Gross processed premiums for core direct commercial surety
 increased eight percent to $35.5 million, but this increase was primarily
 attributable to fluctuations in large account activity.  Absent this activity,
 the commercial segment would have grown four percent, in line with our
 expectations.  For the first quarter of 2001, net written premiums decreased
 eight percent to $72.6 million reflecting the aforementioned gross production
 variances and higher reinsurance costs.  Ceded written premiums increased $1.4
 million to $2.9 million for the first quarter of 2001.
     Underwriting income for the first quarter ended March 31, 2001 decreased
 $3.5 million, or twenty percent, to $13.8 million.  The Company's loss and
 combined ratios were 21.0 percent and 82.0 percent, respectively, for the
 first quarter of 2001 compared with loss and combined ratios for the
 comparable 2000 quarter of 17.9 percent and 77.1 percent, respectively.  The
 loss and combined ratios for the quarter ended March 31, 2001 and 2000 include
 net favorable loss reserve development of $0.3 million and $2.1 million,
 respectively.  The expense ratio increased to 61.0 percent in the first
 quarter of 2001 compared with the expense ratio of 59.2 percent in the
 comparable quarter of 2000, reflecting higher operating costs and the impact
 of increased reinsurance costs on net earned premiums.
     As of March 31, 2001, the Company had repurchased approximately
 1.4 million of its shares at an aggregate cost of $15.5 million under its
 share repurchase program.  The Company has not repurchased any shares in 2001.
     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.
 
     NOTE:  A conference call for investors and the professional investment
 community will be held at 10:00 a.m. Central time on April 30, 2001.  On the
 conference call will be Mark C. Vonnahme, President and Chief Executive
 Officer of CNA Surety Corporation and John S. Heneghan, Chief Financial
 Officer of CNA Surety Corporation.  It will also be broadcast live on the
 Internet at http://www.cnasurety.com/about/webcast.htm or go to the investor
 relations pages of the CNA Surety website ( www.cnasurety.com ) for further
 details.  A taped replay of the call will be available at 11:00 a.m. Central
 time from April 30 to 11:00 a.m. May 7, 2001 by dialing 800-839-6713, access
 code 4155411.
 
 
                             CNA Surety Corporation
                          Press Release Investor Data
                 (Amounts in thousands, except per share data)
 
                                               Three Months Ended
                                                    March 31,
                                             2001           2000
     Operating Results:
 
     Gross written premiums                 $75,484        $80,655
 
     Net written premiums                   $72,627        $79,179
 
     Revenues:
       Net earned premiums                  $76,749        $75,687
       Net investment income                  7,735          7,201
       Net realized investment losses           (29)            (4)
         Total revenues                     $84,455        $82,884
 
 
     Expenses:
       Net losses and loss adjustment
        expenses                             16,086         13,572
       Net commissions, brokerage and
        other underwriting expenses          46,837         44,808
       Interest expense                       1,588          1,621
       Amortization of intangible assets      1,524          1,525
         Total expenses                      66,035         61,526
 
     Income before income taxes              18,420         21,358
 
     Income taxes                             6,476          7,245
 
     Net income                             $11,944        $14,113
 
     Basic earnings per common share          $0.28          $0.33
 
     Diluted earnings per common share        $0.28          $0.33
 
     Basic weighted average shares
      outstanding                            42,713         42,962
 
     Diluted weighted average shares
      outstanding                            42,917         43,065
 
 
     Operating Earnings,
      After Income Taxes:
     Net income                             $11,944        $14,113
     Net realized investment losses              19              3
     Operating earnings                     $11,963        $14,116
 
     Diluted Per Share Data:
     Net income                               $0.28          $0.33
     Net realized investment losses               -              -
     Operating earnings                       $0.28          $0.33
 
     See notes to Press Release Investor Data below.
 
 
                             CNA Surety Corporation
                          Press Release Investor Data
                 (Amounts in thousands, except per share data)
 
                                               Three Months Ended
                                                    March 31,
                                             2001           2000
 
     Underwriting Results:
 
     Gross written premiums:
       Contract                             $38,332        $37,415
       Commercial                            28,991         35,747
       Fidelity and other                     8,161          7,493
                                            $75,484        $80,655
 
     Net written premiums:
       Contract                             $35,767        $35,930
       Commercial                            28,699         35,315
       Fidelity and other                     8,161          7,934
                                            $72,627        $79,179
 
     Net earned premiums                    $76,749        $75,687
     Net losses and loss adjustment
      expenses (A)                           16,086         13,572
     Net commissions, brokerage and other
      underwriting expenses                  46,837         44,808
     Underwriting income                    $13,826        $17,307
 
     Loss ratio (A)                           21.0%          17.9%
     Expense ratio                             61.0           59.2
     Combined ratio (A)                       82.0%          77.1%
 
     Cash Flow Data:
 
     Net cash provided by operations        $10,024        $40,419
 
 
                                             March 31,    December 31,
     Consolidated Balance Sheet Data:          2001           2000
 
     Invested assets and cash              $555,669       $555,975
     Intangible assets, net                 148,358        149,882
     Total assets                           945,023        950,568
 
     Insurance reserves                     410,470        406,636
     Long-term debt                          81,556        101,556
     Total stockholders' equity             383,238        374,032
 
     Book value per share                     $8.97          $8.76
 
     Outstanding shares                      42,725         42,702
 
     Notes to Press Release Investor Data
     (A) 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 $294, or
         0.4%, and $2,101, or 2.8%, for the three months ended March 31, 2001
         and 2000, 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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SOURCE CNA Surety Corporation
    CHICAGO, April 30 /PRNewswire/ -- CNA Surety Corporation (NYSE:   SUR)
 today reported lower profits for the first quarter ended March 31, 2001.
 Operating earnings for the first quarter of 2001 decreased $2.1 million to
 $12.0 million, or $0.28 per share, from $14.1 million, or $0.33 per share, for
 the same period in 2000.  Net income was $11.9 million, or $0.28 per share,
 compared to $14.1 million, or $0.33 per share, in 2000.  First quarter
 operating earnings and net income reflect lower underwriting income partially
 offset by the impact of higher investment income.  Underwriting income
 declined $3.5 million, or twenty percent, primarily due to adverse loss
 experience.  For the first quarter of 2001, the Company's combined ratio was
 82.0 percent.  Investment income increased seven percent to $7.7 million.
     "Underwriting results for the first quarter of 2001 were consistent with
 our expectations given present economic conditions and the changes in the
 business," said Mark C. Vonnahme, President and Chief Executive Officer of CNA
 Surety.  "As anticipated, gross production trends remained positive for
 contract surety with processed premiums up six percent for the quarter.
 Difficult market conditions persist in commercial surety, primarily large
 account business.  Even with CNA Surety's strong underwriting tradition,
 adverse loss trends in more recent accident years and the associated impact on
 the cost of reinsurance remain important risk considerations for our business.
 Our diversified product portfolio continues to provide balance to our
 underwriting results and overall we are pleased with the results for the
 quarter."
     Effective January 1, 2001, the Company began delaying the recording of
 written premium until the effective date of the bond, rather than recording on
 the date the bond is processed ("processed premium").  This change did not
 impact the recognition of net earned premium but did impact gross written
 premiums.  For the first quarter of 2001, gross written premiums decreased six
 percent to $75.5 million.  First quarter gross written premiums reflect the
 unfavorable impact of the change in the timing of recording written premiums
 of $7.9 million and the discontinuance of the CNA Re assumed international
 credit and surety business of $3.0 million.  Excluding international
 reinsurance business assumed from CNA Re, core direct gross processed premiums
 increased seven percent to $83.3 million.
     Gross written premiums for contract surety increased two percent for the
 quarter to $38.3 million.  Gross processed premiums for contract surety
 increased six percent for the quarter to $39.7 million.  These increases are
 primarily due to continued strength in public construction spending.  Gross
 written premiums for core direct commercial surety decreased eleven percent to
 $29.0 million.  Gross processed premiums for core direct commercial surety
 increased eight percent to $35.5 million, but this increase was primarily
 attributable to fluctuations in large account activity.  Absent this activity,
 the commercial segment would have grown four percent, in line with our
 expectations.  For the first quarter of 2001, net written premiums decreased
 eight percent to $72.6 million reflecting the aforementioned gross production
 variances and higher reinsurance costs.  Ceded written premiums increased $1.4
 million to $2.9 million for the first quarter of 2001.
     Underwriting income for the first quarter ended March 31, 2001 decreased
 $3.5 million, or twenty percent, to $13.8 million.  The Company's loss and
 combined ratios were 21.0 percent and 82.0 percent, respectively, for the
 first quarter of 2001 compared with loss and combined ratios for the
 comparable 2000 quarter of 17.9 percent and 77.1 percent, respectively.  The
 loss and combined ratios for the quarter ended March 31, 2001 and 2000 include
 net favorable loss reserve development of $0.3 million and $2.1 million,
 respectively.  The expense ratio increased to 61.0 percent in the first
 quarter of 2001 compared with the expense ratio of 59.2 percent in the
 comparable quarter of 2000, reflecting higher operating costs and the impact
 of increased reinsurance costs on net earned premiums.
     As of March 31, 2001, the Company had repurchased approximately
 1.4 million of its shares at an aggregate cost of $15.5 million under its
 share repurchase program.  The Company has not repurchased any shares in 2001.
     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.
 
     NOTE:  A conference call for investors and the professional investment
 community will be held at 10:00 a.m. Central time on April 30, 2001.  On the
 conference call will be Mark C. Vonnahme, President and Chief Executive
 Officer of CNA Surety Corporation and John S. Heneghan, Chief Financial
 Officer of CNA Surety Corporation.  It will also be broadcast live on the
 Internet at http://www.cnasurety.com/about/webcast.htm or go to the investor
 relations pages of the CNA Surety website ( www.cnasurety.com ) for further
 details.  A taped replay of the call will be available at 11:00 a.m. Central
 time from April 30 to 11:00 a.m. May 7, 2001 by dialing 800-839-6713, access
 code 4155411.
 
 
                             CNA Surety Corporation
                          Press Release Investor Data
                 (Amounts in thousands, except per share data)
 
                                               Three Months Ended
                                                    March 31,
                                             2001           2000
     Operating Results:
 
     Gross written premiums                 $75,484        $80,655
 
     Net written premiums                   $72,627        $79,179
 
     Revenues:
       Net earned premiums                  $76,749        $75,687
       Net investment income                  7,735          7,201
       Net realized investment losses           (29)            (4)
         Total revenues                     $84,455        $82,884
 
 
     Expenses:
       Net losses and loss adjustment
        expenses                             16,086         13,572
       Net commissions, brokerage and
        other underwriting expenses          46,837         44,808
       Interest expense                       1,588          1,621
       Amortization of intangible assets      1,524          1,525
         Total expenses                      66,035         61,526
 
     Income before income taxes              18,420         21,358
 
     Income taxes                             6,476          7,245
 
     Net income                             $11,944        $14,113
 
     Basic earnings per common share          $0.28          $0.33
 
     Diluted earnings per common share        $0.28          $0.33
 
     Basic weighted average shares
      outstanding                            42,713         42,962
 
     Diluted weighted average shares
      outstanding                            42,917         43,065
 
 
     Operating Earnings,
      After Income Taxes:
     Net income                             $11,944        $14,113
     Net realized investment losses              19              3
     Operating earnings                     $11,963        $14,116
 
     Diluted Per Share Data:
     Net income                               $0.28          $0.33
     Net realized investment losses               -              -
     Operating earnings                       $0.28          $0.33
 
     See notes to Press Release Investor Data below.
 
 
                             CNA Surety Corporation
                          Press Release Investor Data
                 (Amounts in thousands, except per share data)
 
                                               Three Months Ended
                                                    March 31,
                                             2001           2000
 
     Underwriting Results:
 
     Gross written premiums:
       Contract                             $38,332        $37,415
       Commercial                            28,991         35,747
       Fidelity and other                     8,161          7,493
                                            $75,484        $80,655
 
     Net written premiums:
       Contract                             $35,767        $35,930
       Commercial                            28,699         35,315
       Fidelity and other                     8,161          7,934
                                            $72,627        $79,179
 
     Net earned premiums                    $76,749        $75,687
     Net losses and loss adjustment
      expenses (A)                           16,086         13,572
     Net commissions, brokerage and other
      underwriting expenses                  46,837         44,808
     Underwriting income                    $13,826        $17,307
 
     Loss ratio (A)                           21.0%          17.9%
     Expense ratio                             61.0           59.2
     Combined ratio (A)                       82.0%          77.1%
 
     Cash Flow Data:
 
     Net cash provided by operations        $10,024        $40,419
 
 
                                             March 31,    December 31,
     Consolidated Balance Sheet Data:          2001           2000
 
     Invested assets and cash              $555,669       $555,975
     Intangible assets, net                 148,358        149,882
     Total assets                           945,023        950,568
 
     Insurance reserves                     410,470        406,636
     Long-term debt                          81,556        101,556
     Total stockholders' equity             383,238        374,032
 
     Book value per share                     $8.97          $8.76
 
     Outstanding shares                      42,725         42,702
 
     Notes to Press Release Investor Data
     (A) 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 $294, or
         0.4%, and $2,101, or 2.8%, for the three months ended March 31, 2001
         and 2000, 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.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X79615631
 
 SOURCE  CNA Surety Corporation