CHICAGO, Oct. 30 /PRNewswire-FirstCall/ -- CNA Surety Corporation
("CNA Surety" or the "Company") (NYSE:SUR) today reported net
income for the third quarter of 2009 of $25.5 million, or $0.57 per
diluted share, compared to $34.3 million, or $0.78 per diluted
share, for the same period in 2008. For the nine months ended
September 30, 2009, net income was $68.6 million, or $1.54 per
diluted share, compared to $81.3 million, or $1.84 per diluted
share, for the same period in 2008. The 2008 periods benefited from
higher levels of favorable loss reserve development. Highlights
included: -- A combined ratio of 79.0% in the quarter. -- Favorable
loss reserve development of $7.9 million in the current quarter. --
Operating cash flow of $44.5 million in the quarter, $109.7 million
through September 30th. -- Pre-tax unrealized investment gains of
$64.7 million at September 30, 2009, compared to a pre-tax
unrealized investment loss of $7.2 million at December 31, 2008. --
Book value per share of $19.99 at September 30th, up 15.1% from
December 31, 2008. "We are again pleased to report strong results
in a difficult climate," said John F. Welch, President and Chief
Executive Officer. "We continue to experience very modest claim
activity despite ongoing weakness in the construction economy. In
light of this, we felt it was appropriate to adjust our loss
reserves for more mature accident years. However, we continue to
set reserves at higher levels for the more recent accident years to
reflect these difficult conditions." Gross Written Premium (in
thousands) ------------------------------------------ Three Months
Ended Nine Months Ended September 30, September 30,
-------------------- --------------- 2009 2008 2009 2008 ---- ----
---- ---- Contract $71,817 $78,418 $215,301 $233,766 Commercial
34,163 34,331 102,579 103,192 Fidelity and other 7,422 7,613 23,481
24,341 ----- ----- ------ ------ $113,402 $120,362 $341,361
$361,299 ======== ======== ======== ======== For the quarter ended
September 30, 2009, gross written premiums decreased 5.8% compared
to the quarter ended September 30, 2008. For the nine months ended
September 30, 2009, gross written premiums decreased 5.5% compared
to the nine months ended September 30, 2008. Contract surety gross
written premiums decreased 8.4% in the third quarter of 2009
compared to the same period in 2008. For the first nine months of
2009, gross written premiums for contract surety decreased 7.9%.
These decreases are due to lower demand resulting from fewer new
construction projects. Commercial surety gross written premiums
decreased 0.5% and 0.6% for the three and nine months ended
September 30, 2009 compared to the same periods in 2008. These
decreases reflect continued adverse economic conditions. Net
Written Premium (in thousands)
------------------------------------------ Three Months Ended Nine
Months Ended September 30, September 30, --------------------
--------------- 2009 2008 2009 2008 ---- ---- ---- ---- Contract
$65,674 $67,692 $196,826 $208,490 Commercial 33,265 33,500 100,188
100,795 Fidelity and other 7,422 7,613 23,481 24,341 ----- -----
------ ------ $106,361 $108,805 $320,495 $333,626 ======== ========
======== ======== For the quarter ended September 30, 2009, net
written premiums decreased 2.2% compared to the quarter ended
September 30, 2008. For the nine months ended September 30, 2009,
net written premiums decreased 3.9% compared to the nine months
ended September 30, 2008, reflecting the decrease in gross written
premiums, offset by lower ceded premium. Underwriting Ratios
------------------------------------- Three Months Ended Nine
Months Ended September 30, September 30, ---------------
------------- 2009 2008 2009 2008 ---- ---- ---- ---- Loss ratio(1)
22.3% 8.0% 26.8% 19.4% Expense ratio 56.7% 56.2% 54.5% 54.5% ----
---- ---- ---- Combined ratio(1) 79.0% 64.2% 81.3% 73.9% ==== ====
==== ==== (1) See note to Press Release Investor Data. The 2009
loss ratios reflect favorable reserve development on prior accident
years of $7.9 million, an impact of 7.1 and 2.6 percentage points
for the three and nine months ended September 30, 2009,
respectively. The 2008 loss ratios reflect favorable reserve
development on prior accident years of $24.9 million and $25.0
million, an impact of 22.7 and 7.8 percentage points for the three
and nine months ended September 30, 2008, respectively. Expenses
for the quarter ended September 30, 2009 included impairments of
capitalized software development costs related to in-development
projects that the Company decided to terminate. These impairments
totaled $4.9 million, which added 4.5 and 1.6 percentage points to
the expense ratio for the three and nine months ended September 30,
2009, respectively. Net investment income was $12.5 million and
$11.8 million for the three months ended September 30, 2009 and
2008, respectively, and $37.4 million and $35.3 million for the
nine months ended September 30, 2009 and 2008, respectively. The
favorable result reflects an increase in invested assets, partially
offset by lower yields, particularly on short-term investments. The
annualized pre-tax yields were 4.1% and 4.3% for the three months
ended September 30, 2009 and 2008, respectively, and 4.2% and 4.4%
for the nine months ended September 30, 2009 and 2008,
respectively. Business Environment The Company's business is
subject to certain risks and uncertainties associated with the
current economic environment and corporate credit conditions. In
the past, the Company's 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 October 30, 2009. 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 888-490-2763. It
will also be broadcast live at
http://www.videonewswire.com/event.asp?id=63069 or go to the
investor relations pages of the CNA Surety website
(http://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
October 30th until 1:00 p.m. (EST) on November 13, 2009 by dialing
888-203-1112, pass code 1340650, or over the Internet at the
foregoing websites. 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 Company's
Securities and Exchange Commission ("SEC") filings are available at
http://www.sec.gov/ or visit us at http://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. "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 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 actual closing of
contemplated transactions and agreements, the effect of the
Company's accounting policies, and other risks detailed in the
Company'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. - Chart Follows-- CNA Surety Corporation Press Release
Investor Data (Amounts in thousands, except per share data) Three
Months Ended Nine Months Ended September 30, September 30,
------------- -------------- 2009 2008 2009 2008 ---- ---- ----
---- Operating Results: Gross written premiums $113,402 $120,362
$341,361 $361,299 ======== ======== ======== ======== Net written
premiums $106,361 108,805 $320,495 $333,626 ======== =======
======== ======== Revenues: Net earned premiums $109,703 109,696
$316,549 $320,814 Net investment income 12,536 11,781 37,359 35,292
Net realized investment gains (losses) 1,056 (177) 943 (207) -----
---- --- ---- Total revenues $123,295 121,300 $354,851 $355,899
-------- ------- -------- -------- Expenses: Net losses and loss
adjustment expenses(1) $24,429 $8,745 $84,992 $62,103 Net
commissions, brokerage and other underwriting expenses 62,169
61,694 172,364 174,806 Interest expense 319 508 1,096 1,659 --- ---
----- ----- Total expenses $86,917 $70,947 $258,452 $238,568
------- ------- -------- -------- Income before income taxes 36,378
50,353 96,399 117,331 Income tax expense 10,854 16,020 27,844
36,046 ------ ------ ------ ------ Net income $25,524 $34,333
$68,555 $81,285 ======= ======= ======= ======= Basic earnings per
common share $0.58 $0.78 $1.55 $1.84 ===== ===== ===== =====
Diluted earnings per common share $0.57 $0.78 $1.54 $1.84 =====
===== ===== ===== Basic weighted average shares outstanding 44,263
44,138 44,240 44,139 ====== ====== ====== ====== Diluted weighted
average shares outstanding 44,411 44,264 44,397 44,258 ======
====== ====== ====== (1) See note to Press Release Investor Data.
CNA Surety Corporation Press Release Investor Data (Amounts in
thousands, except per share data) Three Months Ended Nine Months
Ended September 30, September 30, -------------- ----------------
2009 2008 2009 2008 ---- ---- ---- ---- Cash Flow Data: Net cash
provided by operations $44,537 $30,965 $109,702 $85,244 September
December Consolidated Balance Sheet Data: 30, 2009 31, 2008
-------- -------- Invested assets and cash $1,309,197 $1,126,079
Intangible assets, net 138,785 138,785 Total assets 1,708,963
1,565,519 Insurance reserves 690,902 687,548 Debt 30,930 30,892
Total stockholders' equity 884,762 767,295 Book value per share
$19.99 $17.37 Outstanding shares 44,267 44,168 ====== ====== Note
to Press Release Investor Data (1) Includes the effect of
re-estimates of prior year reserves, known as reserve development.
The dollar amount and percentage point effect of these reserve
reductions were $7.9 million, or 7.1 percentage points, and $24.9
million or 22.7 percentage points, for the three months ended
September 30, 2009 and 2008, respectively. The dollar amount of
these revisions were reductions of $7.9 million, or 2.6 percentage
points, and $25.0 million, or 7.8 percentage points, for the nine
months ended September 30, 2009 and 2008, respectively. DATASOURCE:
CNA Surety Corporation CONTACT: John F. Corcoran, +1-312-822-1371,
or Doreen Lubeck, +1-773-583-4331, both of CNA Surety Corporation
Web Site: http://www.cnasurety.com/
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