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CNA Surety Announces First Quarter 2002 Results CHICAGO, May 7, 2002 -- CNA Surety Corporation (NYSE:SUR) today reported that net income for the first quarter of 2002 decreased to $10.6 million, or $0.25 per share, from $11.9 million, or $0.28 per share, for the same period in 2001. Operating earnings, after income taxes, decreased to $10.7 million, or $0.25 per share, from $12.0 million, or $0.28 per share, in 2001. These decreases reflect the increased costs of the 2002 excess of loss reinsurance program on underwriting results partially offset by the favorable impact of reduced amortization expense due to the required adoption of new accounting standards with respect to goodwill and other intangible assets. For the quarter ended March 31, 2002, gross written premiums increased nine percent to $82.1 million. Gross written premiums for commercial surety increased 21 percent for the quarter to $35.1 million. Contract surety premiums increased three percent to $39.4 million. These increases were primarily due to the continued bond volume growth of small commercial products along with improving rates on large commercial exposures and continued strength in public construction spending for contract surety. Ceded written premiums increased $14.9 million to $17.7 million for the first quarter of 2002 compared to the same period of last year primarily due to changes in the Company’s reinsurance programs, including higher rates on the 2002 excess of loss reinsurance program and the purchase of extended discovery coverage on the Company’s 2001 excess of loss reinsurance program. Net written premiums declined 11 percent to $64.4 million. For the quarter ended March 31, 2002, underwriting income decreased $4.8 million to $9.0 million. The loss and combined ratios were 24.8 percent and 86.6 percent, respectively, for the first quarter of 2002, compared to 21.0 percent and 82.0 percent, respectively, for the same period in 2001. The higher loss and combined ratios in 2002 principally relate to the estimated impact of the $15 million increase in the Company’s per principal net retention to $20 million under its 2002 excess of loss reinsurance program as well as the higher reinsurance rates associated with this reinsurance contract. The expense ratio increased to 61.8 percent for the first quarter of 2002 compared to 61.0 percent for the same period in 2001, primarily due to the effect of higher reinsurance costs on net earned premiums. As of January 1, 2002, the Company adopted the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 142 concerning the accounting for goodwill and other intangible assets. The adoption of this standard eliminated the Company’s amortization of goodwill and other intangibles as of December 31, 2001 and therefore, increased the Company’s reported net income by $1.4 million, or 3 cents per share, as compared to the prior year quarter. If the provisions of this standard were applied to prior periods, net income for the first three months of 2001 would have been $13.4 million, or $0.31 per share. The Company has not repurchased any of its shares in 2002. As of March 31, 2002, the Company had repurchased approximately 1.5 million of its shares at an aggregate cost of $15.6 million since the inception of the Company’s share repurchase program in 1999. 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 35,000 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 May 8, 2002. 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 or go to the investor relations pages of the CNA Surety web site for further details. The call is available to the media, but questions will be restricted to investors and the professional investment community. A taped replay of the call will be available at 11:00 a.m. Central time from May 8 to 11:00 a.m. May 15, 2002, by dialing 800-839-6713, passcode 5064705, or over the Internet at the foregoing web sites. CNA Surety Corporation Press Release Investor Data To view this pdf file, you will need to download Adobe Acrobat Reader. Click on the Adobe icon below to download this free software now.
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