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CNA Surety Announces 11% Increase in Second Quarter Operating Earnings CHICAGO, August 7, 2000 -- CNA Surety Corporation (NYSE:SUR) today reported higher earnings for the second quarter and six months ended June 30, 2000, primarily driven by increases in both underwriting and investment income. Highlights of the second quarter 2000 results compared with the same period in 1999 include:
"In the second quarter, we continued to achieve earnings growth and favorable underwriting results, despite an increasingly difficult business environment," said Mark C. Vonnahme, President and Chief Executive Officer of CNA Surety. "The outlook for CNA Surety's core business is for continued conservative growth. We anticipate construction markets to maintain their relative strength, but growth may slow as compared with last year. We are working to offset some of the softness in our markets with continued productivity improvements and operating efficiencies." For the six months ended June 30, 2000, net income increased 9 percent to $28.2 million, or 66 cents per share, compared to $25.9 million, or 59 cents per share, in 1999. Operating earnings, after income taxes and excluding the non-recurring charge, increased 11 percent to $28.4 million, or 67 cents per share, from $25.6 million, or 58 cents per share, in 1999. These increases in operating earnings were primarily attributable to improved underwriting results as described below and a 16 percent increase in investment income resulting from larger average invested assets and higher portfolio yield. For the second quarter of 2000, net written premiums increased 3 percent to $78.4 million. Excluding international reinsurance business assumed from CNA Reinsurance Company, Limited (London), core direct net written premiums increased 3 percent to $75.4 million for the quarter. Net written premium growth for the second quarter of 2000 was reduced by increased reinsurance costs. The reinsurance rate used to compute ceded premiums is based upon reinsurers' loss experience under the Company's surety excess of loss reinsurance contract on a one quarter lag. Due to increased claims reported to our reinsurers through March 31, 2000, ceded premiums increased $2.0 million to $4.0 million in the second quarter. Gross written premiums (before ceded premiums) increased 5 percent to $82.4 million for the second quarter of 2000. Gross written premiums for contract surety increased 8 percent for the quarter to $42.2 million due to generally favorable economic conditions for public construction nationwide. Gross written premiums for core direct commercial surety increased 3 percent to $30.7 million, primarily due to competitive market conditions for large commercial products. Net written premiums for the second quarter increased 2 percent for contract surety and 3 percent for commercial surety reflecting the foregoing changes in gross production and the effects of higher reinsurance costs. Gross written premiums for the first half of 2000 increased 9 percent to $163.0 million with contract surety and commercial surety up 14 percent and 5 percent, respectively. Net written premiums for the first half of 2000 increased 8 percent to $157.6 million with contract surety and commercial surety up 10 percent and 5 percent, respectively. Underwriting income for the second quarter ended June 30, 2000 increased $1.7 million, or 11 percent, to $17.8 million. The Company's loss and combined ratios were 18.1 percent and 76.4 percent, respectively, for the second quarter of 2000 compared with loss and combined ratios for the comparable 1999 quarter of 16.9 percent and 76.9 percent, respectively. The loss and combined ratios for the second quarter of 2000 include net favorable loss reserve development of $1.8 million compared with net favorable loss reserve development of $2.4 million for the second quarter of 1999. The expense ratio decreased to 58.3 percent in the second quarter of 2000 compared with the expense ratio of 60.0 percent in the comparable quarter of 1999, reflecting an 8 percent increase in net earned premiums. For the first half of 2000, underwriting income increased $3.1 million, or 10 percent, to $35.1 million. The loss and combined ratios were 18.0 percent and 76.8 percent, respectively, for the first half of 2000, compared to 17.2 percent and 76.7 percent, respectively, for the same period in 1999. The loss and combined ratios for the first half of 2000 and the comparable period of 1999 include net favorable loss reserve development of $3.9 million and $4.1 million, respectively. The expense ratio decreased 0.7 percentage points to 58.8 percent for the first half of 2000. Through June 30, 2000, the Company has repurchased approximately 1.2 million of its shares at an aggregate cost of $13.0 million. As of December 31, 1999, the Company had repurchased approximately 1.1 million of its shares at an aggregate cost of $11.8 million. 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. 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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