Improved underwriting income helped CNA Surety Corp. score a net income of $2.6 million, or 6 cents per share, for the fourth quarter of 2002 compared to $600,000, or 1 cent per share, in 2001.
Net operating earnings for the fourth quarter of 2002, which exclude the impacts of net realized investment losses, increased to $8 million from $0.9 million in 2001. After-tax net realized investment losses were $5.3 million in the fourth quarter of 2002 compared to $300,000 in 2001.
Underwriting income increased by $8.4 million to $4.8 million, primarily due to the absence of any large losses and also reflects reduced acquisition and underwriting expenses. Underwriting results for the fourth quarter of 2001 include the company’s provision for net incurred losses and loss adjustment expenses of approximately $8 million related to its exposure to Enron Corporation.
For the quarter, gross written premiums increased 2 percent to $85.3 million. Contract surety gross written premiums increased eight percent to $49.1 million, primarily due to improving rates and modest growth in public construction spending. Commercial surety premiums decreased 8 percent for the quarter to $29.4 million. This decrease was primarily due to the Company’s ongoing efforts to reduce aggregate exposures to large commercial accounts partially offset by continued strong bond volume growth of small commercial products.
Ceded written premiums increased $12.6 million to $18.0 million for the fourth quarter compared to the same period of last year.
Approximately $7 million of the increase relates to higher reinsurance rates for coverage of exposures greater than $60 million per principal. As a result of the changes in gross and ceded written premiums, net written premiums decreased 14 percent to $67.3 million.
For the fourth quarter of 2002, the loss and combined ratios improved to 30.5 percent and 93.6 percent, respectively, compared to 37.0 percent and 104.3 percent, respectively, for the same period in 2001. The 2001 ratios include the net loss reserve addition of approximately $8.0 million related to the company’s loss exposure to Enron Corp.
As in prior quarters of 2002, the company’s loss and combined ratios were higher than historical levels due to the 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 all of the company’s reinsurance contracts.
The expense ratio decreased to 63.1 percent for the fourth quarter of 2002 compared to 67.3 percent for the same period in 2001, primarily due to a reduction in acquisition and underwriting expenses. The fourth quarter of 2001 also included pretax charges of $2.2 million primarily associated with asset write-offs.
Net income for the year declined to $28.7 million, or 67 cents per share, from $36.9 million, or 86 cents per share, in 2001. These decreases were primarily attributable to reduced underwriting income partially offset by the elimination of amortization expense.
Topics Profit Loss Underwriting Reinsurance
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