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8-K - FORM 8-K - CNA SURETY CORP | c64400e8vk.htm |
Exhibit 99
FOR IMMEDIATE RELEASE
CONTACT: | John F. Corcoran, 312 - 822 - 1371 | |
Doreen Lubeck, 773 - 583 - 4331 |
CNA SURETY ANNOUNCES FIRST QUARTER 2011 RESULTS
CHICAGO, April 29, 2011 CNA Surety Corporation (CNA Surety or the Company) (NYSE: SUR)
today reported net income for the first quarter of 2011 of $20.8 million, or $0.46 per diluted
share, compared to $20.8 million, or $0.47 per diluted share, for the same period in 2010.
Highlights included:
| Combined ratio of 83.1%. | ||
| Operating cash flow of $20.9 million. | ||
| Book value per share of $24.20 at March 31, 2011, an increase of 1.3% from December 31, 2010. |
Overall, our first quarter results were solid, said John F. Welch, President and Chief Executive
Officer. Our business operations generated a modest increase in results, but that was offset by
costs associated with the evaluation of CNA Financial Corporations (CNA) proposal to acquire the
remaining outstanding shares of CNA Surety. While our premium production reflects the continuing
headwinds confronting the construction industry, we continue to expand our market reach, underwrite
carefully, reserve prudently and manage our costs.
The evaluation of the CNA proposal concluded last week when our respective boards of directors
approved a merger agreement, Welch continued. The action of the CNA Surety board followed an
affirmative recommendation from the special committee of the board that was established to evaluate
the proposal. There are more steps ahead to complete the merger, but we will remain focused on
meeting the needs of our producers and customers.
Gross Written Premium | ||||||||
(in thousands) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Contract |
$ | 66,212 | $ | 68,457 | ||||
Commercial |
34,994 | 35,221 | ||||||
Fidelity and other |
8,885 | 8,849 | ||||||
$ | 110,091 | $ | 112,527 | |||||
For the quarter ended March 31, 2011, gross written premiums decreased 2.2% as compared to the
quarter ended March 31, 2010.
Contract surety gross written premiums decreased 3.3% in the first quarter of 2011 compared to the
same period in 2010, due to continued challenges in the construction industry.
Commercial surety gross written premiums decreased 0.6% in the first quarter of 2011 compared to
the same period in 2010. This decrease reflects a modest decline in the small commercial market,
partially offset by selective growth in the corporate commercial market.
Net Written Premium | ||||||||
(in thousands) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Contract |
$ | 61,439 | $ | 63,313 | ||||
Commercial |
34,306 | 34,498 | ||||||
Fidelity and other |
8,885 | 8,849 | ||||||
$ | 104,630 | $ | 106,660 | |||||
For the quarter ended March 31, 2011, net written premiums decreased 1.9% as compared to the
quarter ended March 31, 2010, reflecting the decrease in gross written premiums, offset by lower
reinsurance costs.
Underwriting Ratios | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Loss ratio |
29.0 | % | 29.1 | % | ||||
Expense ratio |
54.1 | % | 53.7 | % | ||||
Combined ratio |
83.1 | % | 82.8 | % | ||||
The expense ratio for the first quarter of 2011 was 54.1%, an increase of 0.4 percentage points
compared to the same period in 2010, due to a 1.6% decrease in net earned premium.
In the first quarter of 2011, the Company incurred expenses of $2.0 million related to the
evaluation of the proposal by CNA (NYSE: CNA) to
acquire all of the outstanding shares of common stock of the Company that are not currently owned
by subsidiaries of CNA. These expenses are shown as Other expense in Operating Results in the
accompanying Press Release Investor Data and are not included in the expense ratio shown in the
table above.
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Net investment income for the quarter ended March 31, 2011 was $14.4 million compared to $13.4
million during the first quarter of 2010. The increase reflects the impact of higher overall
invested assets, partially offset by lower yields. The annualized pre-tax yields were 4.1% and 4.2%
for the three months ended March 31, 2011 and 2010, respectively.
Business Environment
The Companys business is subject to certain risks and uncertainties associated with the current
economic environment and corporate credit conditions. In the past, the Companys performance has
been materially impacted by a significant increase in corporate defaults on a worldwide basis.
Because the nature of the business is to insure against non-performance, future results of
operations could be negatively impacted by adverse trends in corporate defaults.
Earnings Conference Call
A conference call for investors and the professional investment community will be held at 11:00
a.m. (EDT) on April 29, 2011. On the conference call will be John F. Welch, President and Chief
Executive Officer of CNA Surety Corporation, and John F. Corcoran, Chief Financial Officer of CNA
Surety Corporation. The call may be accessed by dialing 888-298-3451. It will also be broadcast
live at http://www.videonewswire.com/event.asp?id=78819 or go to the investor relations
pages of the CNA Surety website (www.cnasurety.com) 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 beginning at 1:00 p.m. (EDT) on April 29th
until 1:00 p.m. (EDT) on May 13, 2011 by dialing 888-203-1112, pass code 5529262, or over the
Internet at the foregoing websites.
Important Information and Where To Find It
This press release is neither an offer to purchase nor a solicitation of an offer to sell
securities. The offer to buy shares of CNA Surety common stock referenced in this press release has
not yet commenced. At the time the tender offer is commenced, CNA will file a tender offer
statement on Schedule TO with the United States Securities and Exchange Commission (the SEC) and
CNA Surety will file a solicitation/recommendation statement on Schedule 14D-9. Investors and
stockholders are urged to read the Schedule TO, the Schedule 14D-9 and the other relevant materials
before making any investment decision with respect to the tender offer because they will contain
important
information, including the terms and conditions of the tender offer. These materials and any other
documents filed by CNA Surety or CNA with the SEC may be obtained free of charge at the SECs
website at www.sec.gov. These materials and any other documents filed by CNA with the SEC will be
made available to the Companys shareholders at no expense to them (when available) from CNA at
www.cna.com or at 333 South Wabash Avenue, Chicago, Illinois 60604 and the documents that are filed
by CNA Surety with the SEC (when available) will be made available at no charge from CNA Surety at
www.cnasurety.com or at 333 South Wabash Avenue, Chicago, Illinois 60604.
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Safe Harbor for Forward-Looking Statements
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 significant
increases in corporate defaults on a national or global basis, the impact of competitive products,
policies and pricing, product and policy development, regulatory changes and conditions including
underwriting limitations imposed by the U.S. Department of Treasury, 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, the cost and availability of reinsurance
contracts on reasonable terms, investment portfolio developments and reaction to market conditions,
the results of financing efforts, the effect of the Companys accounting policies, and other risks
detailed in the Companys SEC filings. No assurance can be given that the actual results of
operations and financial condition will conform to the forward-looking statements contained herein.
There can be no assurances that the transaction between CNA Surety and CNA will be consummated;
that the expected benefits of the transaction will materialize; that the transaction will be timely
completed, if at all; that, prior to the completion of the offer, if at all, CNA Surety will
satisfy the conditions to the offer; or that the transaction merger agreement will not be
terminated. CNA Surety undertakes no obligation to update these forward-looking statements except
to the extent otherwise required by law.
About CNA Surety
CNA Surety Corporation is the largest publicly traded surety company in the country. Through its
principal subsidiary, Western Surety Company, CNA Surety provides surety and fidelity bonds in all
50 states through a combined network of approximately 37,000 independent agencies. The Companys
SEC filings are available at www.sec.gov or visit us at www.cnasurety.com for a direct link to the
SEC website.
CNA is a registered service mark, trade name and domain name of CNA Financial Corporation.
# # #
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CNA Surety Corporation
Press Release Investor Data
(Amounts in thousands, except per share data)
Press Release Investor Data
(Amounts in thousands, except per share data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Operating Results: |
||||||||
Gross written premiums |
$ | 110,091 | $ | 112,527 | ||||
Net written premiums |
$ | 104,630 | $ | 106,660 | ||||
Revenues: |
||||||||
Net earned premiums |
$ | 96,658 | $ | 98,252 | ||||
Net investment income |
14,435 | 13,377 | ||||||
Net realized investment gains |
313 | 323 | ||||||
Total revenues |
$ | 111,406 | $ | 111,952 | ||||
Expenses: |
||||||||
Net losses and loss adjustment expenses |
$ | 28,031 | $ | 28,581 | ||||
Net commissions, brokerage and
other underwriting expenses |
52,266 | 52,788 | ||||||
Interest expense |
284 | 281 | ||||||
Other expense |
2,027 | | ||||||
Total expenses |
$ | 82,608 | $ | 81,650 | ||||
Income before income taxes |
28,798 | 30,302 | ||||||
Income tax expense |
8,041 | 9,497 | ||||||
Net income |
$ | 20,757 | $ | 20,805 | ||||
Basic earnings per common share |
$ | 0.46 | $ | 0.47 | ||||
Diluted earnings per common share |
$ | 0.46 | $ | 0.47 | ||||
Basic weighted average shares outstanding |
44,810 | 44,280 | ||||||
Diluted weighted average shares outstanding |
45,157 | 44,421 | ||||||
Cash Flow Data: |
||||||||
Net cash flow provided by operations |
$ | 20,911 | $ | 26,312 | ||||
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CNA Surety Corporation
Press Release Investor Data
(Amounts in thousands, except per share data)
Press Release Investor Data
(Amounts in thousands, except per share data)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Consolidated Balance Sheet Data: |
||||||||
Invested assets and cash |
$ | 1,481,811 | $ | 1,466,693 | ||||
Deferred policy acquisition costs |
101,365 | 98,572 | ||||||
Insurance receivables |
84,417 | 74,831 | ||||||
Goodwill and other intangible
assets, net |
138,785 | 138,785 | ||||||
Total assets |
1,857,635 | 1,837,734 | ||||||
Unpaid losses and loss
adjustment expenses |
401,103 | 389,089 | ||||||
Unearned premiums |
253,946 | 245,986 | ||||||
Debt |
30,930 | 30,930 | ||||||
Accumulated other comprehensive
income |
28,440 | 32,436 | ||||||
Total stockholders equity |
1,088,075 | 1,068,733 | ||||||
Book value per share |
$ | 24.20 | $ | 23.88 | ||||
Outstanding shares |
44,970 | 44,748 | ||||||
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