Chicago-based CNA Surety Corp. reported that net income for the first quarter of 2003 was $9.6 million, or 22 cents per share, down 9 percent from a year ago’s $10.6 million, or 25 cents per share. This decrease reflects higher current year provisions for incurred losses and the increased cost of reinsurance which were partially offset by the benefits of improved product pricing, according to a statement released by the company.
For the quarter ended March 31, 2003, gross written premiums increased 12 percent to $91.7 million. Gross written premiums for commercial surety increased 20 percent for the quarter to $42.0 million and contract surety premiums increased six percent to $41.6 million. These increases were primarily due to the continued volume growth of small commercial products along with improving rates on large commercial and contract bonds. Ceded written premiums decreased $3.2 million to $14.5 million for the first quarter of 2003 compared to the same period of last year primarily due to changes in the Company’s reinsurance programs. Net written premiums increased 20 percent to $77.1 million.
For the quarter ended March 31, 2003, underwriting income decreased $2.9 million to $6.1 million. The loss and combined ratios were 27.0 percent and 91.1 percent, respectively, for the first quarter of 2003, compared to 24.8 percent and 86.6 percent, respectively, for the same period in 2002. The higher loss and combined ratios in 2003 principally relate to higher current year provisions for incurred losses on the company’s branch contract and commercial business, as well as higher reinsurance costs. The expense ratio increased to 64.1 percent for the first quarter of 2003 compared to 61.8 percent for the same period in 2002, primarily due to the effect of higher reinsurance costs on net earned premiums.
As of March 31, 2003, stockholders’ equity increased to $430 million, or $10 per share, up three percent from Dec. 31, 2002. Combined statutory surplus totaled $241 million at March 31, 2003, resulting in a net written premium to statutory surplus ratio of 1.3 to 1.
The company’s business is subject to certain risks and uncertainties associated with the current economic environment and corporate credit conditions. The company’s performance, much like that of other surety companies and commercial credit providers, has been materially impacted by the significant increase in corporate defaults on a worldwide basis. Because the nature of our business is to insure against non-performance, our operations will continue to be negatively impacted if the trend toward increased corporate defaults does not reverse itself. These economic and credit conditions may also impact the availability and cost of reinsurance.
The company has not repurchased any of its shares in 2003. As of March 31, 2003, 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.
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