CNA-Capsure Agreement
News Release                     

NEWS                                                Contact:
                                                    CNA
                                                    ---
                                                    Roger Morris
                                                    (312) 822-4195

                                                    Capsure Holdings
                                                    -------------------
                                                    Mary Jane Robertson
                                                    (770) 668-1216

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 Mark C.  Vonnahme,  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.  Samuel  Zell,
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.
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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 Bruce A. Esselborn,  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  Joe P.  Kirby,  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 Austin,  Dallas,  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.