1044566--2/27/2006--CNA_SURETY

related topics

{loss, insurance, financial}

{system, service, information}

{loan, real, estate}

{capital, credit, financial}

{debt, indebtedness, cash}

{cost, contract, operation}

{competitive, industry, competition}

{cost, regulation, environmental}

WE MAY DETERMINE THAT OUR LOSS RESERVES ARE INSUFFICIENT TO COVER OUR ESTIMATED ULTIMATE UNPAID LIABILITY FOR CLAIMS AND WE MAY NEED TO INCREASE THEM. SURETY LOSSES AND OUR RESULTS CAN BE VOLATILE. WE HAVE A SIGNIFICANT CONCENTRATION OF EXPOSURE TO CONSTRUCTION FIRMS. OUR PREMIUM WRITINGS AND PROFITABILITY ARE IMPACTED BY THE AVAILABILITY AND COST OF REINSURANCE AND OUR REINSURANCE PURCHASING DECISIONS. WE MAY NOT BE ABLE TO COLLECT AMOUNTS OWED TO US BY REINSURERS. WE RELY UPON AFFILIATED COMPANIES THAT WE DO NOT CONTROL TO CONDUCT CERTAIN ASPECTS OF OUR BUSINESS. RATING AGENCIES MAY DOWNGRADE THEIR RATINGS FOR US OR FOR AFFILIATED COMPANIES THAT WE RELY ON TO WRITE BUSINESS. THIS WOULD ADVERSELY AFFECT OUR ABILITY TO WRITE BUSINESS. WE FACE INTENSE COMPETITION. DEMAND FOR OUR PRODUCTS IS CREATED BY LAWS THAT COULD BE CHANGED. WE ARE SUBJECT TO CAPITAL ADEQUACY REQUIREMENTS AND, IF WE DO NOT MEET THESE REQUIREMENTS, REGULATORY AGENCIES MAY RESTRICT OR PROHIBIT US FROM OPERATING OUR BUSINESS. OUR INSURANCE SUBSIDIARIES, UPON WHOM WE DEPEND FOR DIVIDENDS AND ADVANCES IN ORDER TO FUND OUR WORKING CAPITAL NEEDS, ARE LIMITED BY STATE REGULATORS IN THEIR ABILITY TO PAY DIVIDENDS. SOME OF THE CREDIT EXTENDED TO US REQUIRES ONGOING COMPLIANCE WITH CONDITIONS AND LIMITATIONS REGARDING OUR PROFITABILITY AND FINANCIAL CONDITION. OUR INVESTMENT PORTFOLIO MAY SUFFER REDUCED RETURNS OR LOSSES. WE RELY ON OUR INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS SYSTEMS TO CONDUCT OUR BUSINESS.

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1044566--2/27/2006--CNA_SURETY_CORP