Chicago-based CNA Surety Corporation reported net income for the third quarter of $12.0 million, or 28 cents per share, compared to $13.3 million, or 31 cents per share, for the comparable quarter in 2000.
Operating earnings for the third quarter, after income taxes, were $11.8 million, or 27 cents per share, compared to $13.4 million, or 31 cents per share, for the same period in 2000. Third quarter operating earnings and net income reflect reduced underwriting and investment income which was partially offset by the favorable impact of decreased interest expense.
Underwriting income declined $2.4 million, or 16 percent, primarily due to higher incurred losses principally associated with credit related loss events. For the third quarter of 2001, the Company’s combined ratio was 84.0 percent as compared to 78.9 percent for the same period in 2000. Investment income declined five percent to $7.1 million due to the impact of lower investment yields and reduced invested assets primarily associated with increased dividend payments to shareholders. Interest expense declined $1.0 million to $0.8 million due to declining interest rates and lower outstanding debt levels.
According to Mark Vonnahme, President and CEO of the company, overall the company’s underwriting results for the third quarter were consistent with their expectations. Production trends remained generally positive with stable submission activity and an improving pricing environment. Incurred loss trends generally remain unfavorable in the surety industry due to current economic and credit conditions. Vonhamme noted that the current economic outlook will create additional challenges for CNA Surety in the short term, market conditions are improving rapidly from both a pricing and underwriting standpoint, particularly on larger risks. He commented that these changes are being driven by reduced underwriting capacity in both the primary and reinsurance markets as industry participants reassess exposures and expected risk adjusted returns on capital.
Net income was $36.3 million, or 85 cents per share, for the first nine months of 2001 compared to $41.6 million, or 97 cents per share, for the same period in 2000. Operating earnings were $36.0 million, or 84 cents per share, for the first nine months of 2001 compared to $41.8 million, or 98 cents per share, for the same period in 2000. The decreases in net income and operating earnings were primarily attributable to the aforementioned reduced underwriting and investment income that was partially offset by the favorable impact of decreased interest expense. Underwriting income declined $9.9 million, or 20 percent, primarily due to higher incurred losses. For the first nine months of 2001, the company’s combined ratio was 82.8 percent compared to 77.5 percent for the same period of last year.
For the third quarter of 2001, gross written premiums increased 11 percent to $88.0 million. Gross written premiums for contract surety increased 12 percent for the quarter to $48.7 million, primarily due to continued strength in public construction nationwide, particularly highway and road, airport and school related projects.
Gross written premiums for commercial surety increased 10 percent to $32.5 million primarily due to increases in the large commercial segment that benefited from pricing actions. For the third quarter of 2001, net written premiums increased 12 percent to $84.1 million with contract surety and commercial surety up 15 percent and eight percent, respectively, reflecting the aforementioned gross production changes. Ceded written premiums decreased $0.3 million to $3.9 million for the quarter compared to the same period of 2000.
Topics Trends Profit Loss Underwriting
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