CNA Surety Announces Second Quarter and Year-to-Date Results CHICAGO, August 5, 2002 -- CNA Surety Corporation (NYSE:SUR) today reported that net income for the second quarter of 2002 increased to $12.9 million, or $0.30 per share, from $12.3 million, or $0.29 per share, for the same period in 2001. The increase in net income reflects the favorable impact of net realized investment gains of $0.02 per share. Operating earnings, after income taxes, decreased to $11.9 million, or $0.28 per share, from $12.2 million, or $0.29 per share, in 2001. Operating earnings and net income for the second quarter reflect the increased costs of the Company’s 2002 excess of loss reinsurance program, partially offset by reduced amortization expense due to the required adoption of new accounting standards with respect to goodwill and other intangible assets, and reduced acquisition, underwriting and interest expense. For the quarter ended June 30, 2002, gross written premiums increased 11 percent to $95.5 million. Gross written premiums for contract surety increased 12 percent to $53.9 million. Commercial surety premiums increased 11 percent for the quarter to $34.9 million. These increases were primarily due to strength in public construction spending for contract surety, as well as continued bond volume growth of small commercial products and improving rates on large commercial bonds. Commercial surety premium volume growth for the quarter has been impacted by the Company’s ongoing efforts to reduce aggregate exposures to large commercial bonds. Ceded written premiums increased $4.1 million to $9.1 million for the second quarter of the Company’s 2002 compared to the same period of last year primarily due to higher rates on the 2002 excess of loss reinsurance program. Net written premiums increased seven percent to $86.4 million. Underwriting income decreased $3.3 million to $10.5 million for the second quarter of 2002 as compared to the same period last year. The loss and combined ratios were 25.9 percent and 86.1 percent, respectively, for the second quarter of 2002, compared to 21.3 percent and 82.4 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 from $5 million 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 decreased to 60.2 percent for the second quarter of 2002 compared to 61.1 percent for the same period in 2001, primarily due to a reduction in acquisition and underwriting expenses, partially offset by the effect of higher reinsurance costs on net earned premiums. Net income for the six months ended June 30, 2002 declined to $23.5 million, or $0.55 per share, from $24.3 million, or $0.57 per share, in 2001. This decrease is primarily due to reduced operating earnings partially offset by investment gains. Operating earnings, after income taxes, declined to $22.6 million, or $0.53 per share, from $24.2 million, or $0.57 per share, in 2001. This decrease was primarily attributable to reduced underwriting income, partially offset by reduced interest expense. Gross written premiums increased 10 percent for the six months ended June 30, 2002 to $177.6 million. Commercial surety and contract surety written premiums increased 16 percent and eight percent, to $70.0 million and $93.3 million, respectively. Ceded written premiums increased $19.0 million to $26.8 million for the first six months of 2002 compared to the same period of last year. This was primarily due to the aforementioned increase in costs related to the 2002 excess of loss reinsurance program and the purchase of extended discovery coverage on the Company’s 2001 excess of loss reinsurance program in the first quarter of 2002. Net written premiums decreased two percent to $150.8 million. For the six months ended June 30, 2002, underwriting income declined $8.1 million to $19.6 million primarily due to the aforementioned changes in the Company’s reinsurance programs. The loss and combined ratios were 25.4 percent and 86.3 percent, respectively, for the first six months of 2002, compared to 21.1 percent and 82.2 percent for the same period in 2001. The expense ratio decreased to 60.9 percent for the six months of 2002 compared to 61.1 percent for the same period in 2001, primarily due to a reduction in acquisition and underwriting expenses, partially offset by 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 intangibles as of December 31, 2001 and therefore, increased the Company’s reported second quarter and six-month net income by $1.5 million, or 3 cents per share, and $2.9 million, or 7 cents per share, respectively, as compared to the same periods in 2001. If the provisions of this standard were applied to prior periods, net income for the first three and six month periods ended June 30, 2001 would have been $13.8 million, or $0.33 per share and $27.2 million, or $0.64 per share, respectively. At June 30, 2002, stockholders’ equity increased to $406 million, or $9.47 per share, up five percent from December 31, 2001. This increase is after common stockholder dividends of $0.30 per share, which reflect a 25% increase over dividends paid in the same six month period in 2001. The Company has not repurchased any of its shares in 2002. As of June 30, 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 August 6, 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 August 6 to 11:00 a.m. August 13, 2002, by dialing 800-839-6713, passcode 5196653, 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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