CNA-Capsure Agreement
News Release
NEWS Contact:
CNA
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Xxxxx Xxxxxx
(000) 000-0000
Capsure Holdings
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Xxxx Xxxx Xxxxxxxxx
(000) 000-0000
For Immediate Release
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CNA AND CAPSURE HOLDINGS AGREE TO FORM LARGEST U.S. SURETY COMPANY
CHICAGO, Dec. 19, 1996 -- CNA Financial Corporation (NYSE: CNA) and Capsure
Holdings Corp. (NYSE: CSH) today announced a definitive agreement to form a new
stock company, CNA Surety Corporation, which will be the largest surety company
in the United States.
On a pro forma basis, CNA Surety Corporation's net written premiums for the 12
months ended September 30, 1996 would total $232.8 million out of a total surety
market of $2.7 billion, making it 30 percent larger than the next largest U. S.
surety operation. In addition, the combination of Capsure and CNA's surety
operations presents opportunities for expense savings by consolidating all
processing and agency management functions; moving towards a common information
technology platform; and combining various administrative functions. CNA Surety
Corporation will combine the 320 employees from CNA's existing surety operations
in Chicago and 41 branches with Capsure Holdings' 570 employees.
"CNA Surety Corporation will be the premier surety operation in the United
States with a strong presence across virtually all segments of the surety
market," said Xxxx X. Xxxxxxxx, head of CNA surety operations, who has been
named president and chief executive officer of CNA Surety Corporation. "We have
substantial capacity as a result of CNA's commitment to provide co-surety or
reinsurance on multi-million dollar accounts. That, along with excellent
industry ratings based on a strong balance sheet and a history of profitability,
positions us to provide our agents and brokers with the most diversified and
competitive line of surety products in the United States."
CNA Financial Corporation, through its subsidiaries, will be the majority
shareholder of the new company, owning 61.75 percent of the shares. The
remaining shares will be issued to the existing Capsure shareholders (a portion
of these shares will be held as options for the existing holders of Capsure
options) in a tax-free exchange for their Capsure shares on a one-for-one basis
and are expected to be traded on the New York Stock Exchange. Xxxxxx Xxxx,
Capsure's largest shareholder with a 26.2 percent ownership interest, has agreed
to vote his shares in favor of the merger. Because of the required regulatory
reviews and approvals, the transaction is not expected to be finalized until the
second quarter of 1997.
CNA's surety operations have a leading position in the commercial surety and
contract bond market. Capsure Holdings, through its Western Surety Company and
Universal Surety of America subsidiaries, has concentrated on the small contract
and commercial surety market segments. Western Surety also has one of the most
advanced commercial surety processing centers in the industry and a 62-person
national marketing force. CNA Surety Corporation will offer a complete line of
surety and bond products through what are regarded as the strongest producer
relationships in the business.
CNA-CAPSURE AGREEMENT
NEWS RELEASE PAGE 2
"We are very excited about this combination, a natural extension of our
`one-stop shopping' vision of USA/Western," said Xxxxx X. Xxxxxxxxx, president
of Capsure. "At almost three times the size of Capsure in terms of premium
volume and statutory capital, the new CNA Surety Corporation may be expected to
enjoy meaningful economies of scale as the operations are merged and to realize
additional savings by way of a lower cost of capital. Also, the continuing
support of CNA through the various reinsurance arrangements offers underwriting
capacity well beyond Capsure's current level and helps protect the surplus and
earnings stream of the new company going forward."
"We've felt for a long time that it would be in our best interests to eventually
be a part of a larger insurance organization, and we're fortunate to be part of
the CNA group of companies," commented Xxx X. Xxxxx, CEO at Western Surety
Company.
CNA Financial Corporation, the parent company of the CNA insurance companies, is
one of the ten largest U. S. insurance organizations and the third largest U. S.
property/casualty insurance group as measured by 1995 premium volume. Loews
Corporation owns 84 percent of the common stock of CNA Financial Corporation.
For the 12 months ended September 30, 1996, CNA had revenues of $16.7 billion.
Assets at September 30, 1996 were $60.8 billion.
Capsure Holdings Corp. provides surety and fidelity bonds nationwide through its
subsidiaries Western Surety Company and Universal Surety of America. Western
Surety, with offices in Sioux Falls and Dallas, markets license and permit,
fiduciary and probate, fidelity, public official and notary public bonds in all
50 states through 37,000 independent property and casualty insurance agencies.
Universal Surety markets its products through approximately 1,800 independent
property and casualty insurance agents through its headquarters in Houston and
branches in Xxxxxx, Xxxxxx, Denver, Kansas City and San Antonio. For the 12
months ended September 30, 1996, Capsure had revenues of $113.7 million. Assets
at September 30, 1996 were $408.2 million.
# # #
The transaction is subject to approval of the shareholders of Capsure and
insurance regulators in the domiciliary states of Western and Universal.
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 competitive products, policies and pricing, product
and policy development, regulatory changes and conditions, rating agency
policies and practices, development of claims and the effect on loss reserves,
the performance of reinsurance companies under reinsurance contracts, investment
portfolio developments and reaction to market conditions, the results of
financing efforts, the actual closing of contemplated transactions and
agreements, the effect of accounting policies, and other risks detailed in
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.
