##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      FORM 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    December 31,
    2009o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission File
    Number: 1-13277
      CNA SURETY
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Delaware

36-4144905(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)333 South Wabash Avenue, Chicago, Illinois

60604(Address of principal executive
    offices)

(Zip Code)   (312) 822-5000
  (Registrants telephone
    number, including area code)
      None
   Common Stock, $0.01 Par Value
       o þ
  o þ
  þ o
  Regulation S-T o þ
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated filer  o

Accelerated filer  þ

Non-accelerated filer  o
    (Do not check if a smaller reporting company)

Smaller reporting company  o.   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:




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##### Table of Contents





CNA
    SURETY CORPORATION AND SUBSIDIARIES
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.

Business


2General


2Formation of CNA Surety and Merger


2Description of Business


2Financial Strength Ratings


2Product Information


3Marketing


5Underwriting


6Competition


6Reinsurance


7Reserves for Unpaid Losses and Loss
    Adjustment Expenses


7Claims


9Environmental Claims


10Regulation


10Investments


11Employees


11Availability of Securities and
    Exchange Commission Reports


11Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff Comments


14Item 2.

Properties


14Item 3.

Legal Proceedings


15Item 4.

Submission of Matters to a Vote of Security
    Holders


15PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


15Item 6.

Selected Financial Data


17Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


18Item 7A.

Quantitative and Qualitative Discussions About
    Market Risk


44Item 8.

Financial Statements and Supplementary Data


47Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


89Item 9A.

Controls and Procedures


89Item 9B.

Other Information


89PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


89Item 11.

Executive Compensation


89Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


89Item 13.

Certain Relationships and Related Transactions
    and Director Independence


89Item 14.

Principal Accounting Fees and Services


89PART IVItem 15.

Exhibits, Financial Statement Schedules


90EX-10.46EX-10.47EX-10.48EX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2  1




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
 PART I.  ITEM 1.
    BUSINESS General   Formation
    of CNA Surety and Merger   Description
    of Business   Financial
    Strength Ratings  A.M. Best
    Company, Inc.
     2




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##### Table of Contents



Standard
    and Poors
   Product
    Information    Products
    and Policies
    and/or
    Bid bonds:
  Performance bonds:
  Payment bonds:
      License and Permit bonds:
  Judicial and Fiduciary bonds:
 3




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##### Table of Contents



Public Official bonds:
          Gross Written Premiums% of





% of





% of2009


Total


2008


Total


2007


TotalContract

$
274,848



62.7
%

$
300,236



64.3
%

$
305,624



64.8
%Commercial:License and permit


75,594



17.3



80,291



17.2



78,875



16.7Judicial and fiduciary


22,941



5.2



23,227



5.0



23,348



5.0Public official


25,707



5.9



23,466



5.0



23,584



5.0Other


9,306



2.1



9,015



1.9



9,021



1.9Total commercial


133,548



30.5



135,999



29.1



134,828



28.6Fidelity and other


29,909



6.8



30,892



6.6



31,208



6.6$
438,305



100.0
%

$
467,127



100.0
%

$
471,660



100.0
%Domestic

$
432,260



98.6
%

$
461,998



98.9
%

$
467,285



99.1
%International


6,045



1.4



5,129



1.1



4,375



0.9$
438,305



100.0
%

$
467,127



100.0
%

$
471,660



100.0
%   Net Written Premiums% of





% of





% of2009


Total


2008


Total


2007


TotalContract

$
250,793



61.0
%

$
268,085



62.1
%

$
266,749



62.3
%Commercial


130,332



31.7



132,702



30.7



130,332



30.4Fidelity and other


29,909



7.3



30,892



7.2



31,208



7.3$
411,034



100.0
%

$
431,679



100.0
%

$
428,289



100.0
%Domestic

$
404,989



98.5
%

$
426,570



98.8
%

$
423,914



99.0
%International


6,045



1.5



5,109



1.2



4,375



1.0$
411,034



100.0
%

$
431,679



100.0
%

$
428,289



100.0
%   4




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##### Table of Contents



Domestic Bonds/Policies in Force as of December 31,% of





% of





% of2009


Total


2008


Total


2007


TotalContract


29



1.3
%


31



1.3
%


30



1.2
%Commercial


1,711



75.8



1,836



76.4



1,906



76.5Fidelity and other


517



22.9



537



22.3



557



22.32,257



100.0
%


2,404



100.0
%


2,493



100.0
%     Average Bond Penalty/Policy Limit as of December 31,2009


2008


2007Contract

$
1,150.0


$
1,236.7


$
1,191.8Commercial


14.8



14.5



14.1Fidelity and other


19.8



19.9



19.4    Marketing      Years Ended December 31,2009


2008


2007Gross Written Premiums by State:Texas


9.4
%


9.4
%


9.4
%California


8.4



9.2



9.1Florida


5.7



6.0



7.6New York


4.9



5.0



4.5Illinois


4.5



4.5



4.5Massachusetts


3.3



3.1



3.1Pennsylvania


3.1



2.8



2.9Indiana


2.8



2.3



2.3Georgia


2.7



3.4



3.3All
    other(a)


55.2



54.3



53.3Total


100.0
%


100.0
%


100.0
%     (a)

    
    Includes the District of Columbia and Puerto Rico. No other
    state represented more than 2.3% for the year ended
    December 31, 2009. 5




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##### Table of Contents



Contract
    Surety
    Commercial
    Surety
    one-day
   Underwriting     Competition     6




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##### Table of Contents



Reinsurance         Reserves
    for Unpaid Losses and Loss Adjustment Expenses     7




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##### Table of Contents



Net reserves at end of year, GAAP basis

$
355,155Ceded reinsurance, net of indemnification


50,968Gross reserves at end of year, GAAP basis


406,123Estimated reinsurance recoverable netted against gross reserves
    for SAP


(50,968
)Net reserves on retroactive reinsurance assumed


(11,093
)Net reserves at end of year, SAP basis

$
344,062     8




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##### Table of Contents



As of December 31,1999


2000


2001


2002


2003


2004


2005


2006


2007


2008


2009(Dollars in thousands)Gross reserves for losses and loss adjustment expenses

$
157,933


$
204,457


$
315,811


$
303,433


$
413,539


$
363,387


$
424,449


$
434,224


$
472,842


$
428,724


$
406,123Originally reported ceded recoverable


20,464



70,159



166,318



137,301



158,357



116,831



147,435



144,858



150,496



83,691



50,968Net reserves for losses and loss adjustment expenses


137,469



134,298



149,493



166,132



255,182



246,556



277,014



289,366



322,346



345,033



355,155Net paid (cumulative) as of:One year later


35,825



44,763



64,832



59,567



88,857



65,353



76,623



55,879



46,203



43,723



Two years later


47,795



75,825



98,885



100,595



128,607



92,582



120,462



81,802



70,941







Three years later


73,341



87,011



117,396



115,034



145,895



114,984



133,942



95,857











Four years later


81,788



93,154



132,891



125,740



158,257



124,742



145,133















Five years later


86,539



99,117



139,051



133,696



161,978



134,324



















Six years later


91,520



100,628



139,125



136,669



171,446























Seven years later


92,727



98,737



145,058



143,254



























Eight years later


90,448



102,953



147,770































Nine years later


94,550



104,865



































Ten years later


96,420







































Net reserves re-estimated as of:End of initial year


137,469



134,298



149,493



166,132



255,182



246,556



277,014



289,366



322,346



345,033



355,155One year later


130,376



139,110



155,673



205,422



254,570



223,223



271,704



284,312



276,845



290,751



Two years later


128,134



140,094



182,812



199,865



231,619



224,919



264,794



230,205



222,562







Three years later


130,280



132,504



169,340



195,191



246,244



218,301



232,115



202,172











Four years later


122,469



120,051



174,346



203,488



237,544



202,416



214,685















Five years later


110,055



119,471



174,847



196,258



225,537



193,888



















Six years later


109,874



118,485



167,741



191,609



225,511























Seven years later


109,237



118,834



164,813



190,495



























Eight years later


109,672



116,344



164,343































Nine years later


107,397



117,661



































Ten years later


108,857







































Total net redundancy (deficiency)

$
28,612


$
16,637


$
(14,850)


$
(24,363)


$
29,671


$
52,668


$
62,329


$
87,194


$
99,784


$
54,282


$
Cumulative redundancy (deficiency) as a % of original estimate


20.8
%


12.4%



(9.9)%



(14.7)%



11.6%



21.4%



22.5%



30.1%



31.0%



15.7%



%Net reserves re-estimated

$
108,857


$
117,661


$
164,343


$
190,495


$
225,511


$
193,888


$
214,685


$
202,172


$
222,562


$
290,751Re-estimated ceded recoverable


79,039



116,514



128,318



149,677



98,938



95,813



140,915



146,104



157,523



84,221Gross reserves re-estimated

$
187,896


$
234,175


$
292,661


$
340,172


$
324,449


$
289,701


$
355,600


$
348,276


$
380,085


$
374,972Total gross (deficiency) redundancy

$
(29,963
)

$
(29,718)


$
23,150


$
(36,739)


$
89,090


$
73,686


$
68,849


$
85,948


$
92,757


$
53,752  Claims   9




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Environmental
    Claims   Regulation           10




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##### Table of Contents



Investments       Employees   Availability
    of SEC Reports  Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330.
 11




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##### Table of Contents



ITEM 1A.
    RISK
    FACTORS      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.
   12




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##### Table of Contents



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.
   13




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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 that may be 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.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES     14




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS  Form 10-K.
 PART II.  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    High


Low20094th Quarter

$
17.10


$
13.243rd Quarter

$
17.91


$
12.802nd Quarter

$
19.81


$
13.031st Quarter

$
19.80


$
11.5820084th Quarter

$
20.28


$
9.003rd Quarter

$
22.90


$
10.612nd Quarter

$
15.98


$
12.591st Quarter

$
19.79


$
13.12  15




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##### Table of Contents



Indexed ReturnsYears Ended December 31,Company/Index

2004


2005


2006


2007


2008


2009CNA Surety Corporation


100



109.14



161.05



148.24



143.82



111.54Standard & Poors 500 Stock Index


100



103.00



117.03



121.16



74.53



92.01Standard & Poors Property & Casualty
    Index


100



112.98



125.09



105.43



72.30



78.97   
      Number of Securities to be

Weighted-Average

Number of Securities RemainingIssued Upon the Exercise of

Exercise Price of

Available for Future IssuanceOutstanding Options

Outstanding Options

Under Equity Compensation PlansEquity compensation plans approved by security holders


1,318,288


$
15.78



2,252,920   Dividends
   16




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA      2009(b)(c)


2008(b)(c)


2007(b)(c)


2006(b)(c)


2005(Dollars in thousands, except per share data)Total revenues

$
473,442


$
477,624


$
465,697


$
431,693


$
384,082Gross written premiums

$
438,305


$
467,127


$
471,660


$
451,356


$
417,530Net written premiums

$
411,034


$
431,679


$
428,289


$
409,629


$
365,948Net earned premium

$
421,872


$
431,696


$
421,506


$
393,642


$
348,361Net losses and loss adjustment
    expenses(a)


69,416



80,844



103,124



95,830



127,841Net commissions, brokerage and other underwriting expenses


233,427



235,420



227,412



216,560



202,521Net investment income


50,371



47,302



44,636



39,324



33,747Net realized investment gains (losses)


1,199



(1,374
)


(445
)


(1,273
)


1,974Interest expense


1,391



2,148



2,918



3,669



3,545Income before income taxes


169,208



159,212



132,243



115,634



50,175Income tax expense


51,347



48,809



39,747



32,816



11,744Net income

$
117,861


$
110,403


$
92,496


$
82,818


$
38,431Basic earnings per common share

$
2.66


$
2.50


$
2.10


$
1.90


$
0.89Diluted earnings per common share

$
2.65


$
2.49


$
2.09


$
1.89


$
0.89Loss
    ratio(a)


16.5
%


18.7
%


24.5
%


24.3
%


36.7
%Expense ratio


55.3



54.5



54.0



55.0



58.1Combined
    ratio(a)


71.8
%


73.2
%


78.5
%


79.3
%


94.8
%Invested assets and cash

$
1,322,654


$
1,126,079


$
1,024,826


$
897,285


$
797,914Intangible assets, net of amortization


138,785



138,785



138,785



138,785



138,785Total assets


1,709,035



1,565,519



1,507,654



1,368,333



1,262,614Insurance reserves


653,899



687,548



731,772



688,027



665,496Debt


30,930



30,892



30,791



30,690



50,589Total liabilities


785,951



798,224



839,949



802,431



786,039Stockholders equity


923,084



767,295



667,705



565,902



476,575Book value per share

$
20.85


$
17.37


$
15.13


$
12.90


$
11.00     (a)

    
    Includes the effect of re-estimates of prior year reserves,
    known as reserve development. The dollar amount of these reserve
    reductions were $54.3 million, $45.5 million,
    $5.1 million, $5.3 million and $23.3 million for
    the years ended December 31, 2009, 2008, 2007, 2006 and
    2005, respectively. The percentage point effect of these reserve
    reductions on the loss and combined ratios for these years were
    12.8, 10.6, 1.2, 1.4 and 6.7 percentage points,
    respectively.(b)

    
    Effective in 2006, the Company adopted accounting guidance that
    requires stock-based compensation expense to be measured and
    recorded using a fair-value based method. Prior to 2006, the
    Company applied the intrinsic value method in accounting for its
    stock-based compensation plan as allowed under the previous
    accounting 17




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##### Table of Contents



guidance. Under the recognition and measurement principles of
    that guidance, no stock-based compensation cost was recognized,
    as the exercise price of the granted options equaled the market
    price of the underlying stock at the grant date. This change in
    accounting method increased compensation expense by
    $2.0 million, $1.7 million, $1.9 million and
    $1.2 million for the years ended December 31, 2009,
    2008, 2007 and 2006, respectively. Net of deferred tax benefit,
    net income was decreased by $1.3 million,
    $1.1 million, $1.2 million and $0.8 million for
    the years ended December 31, 2009, 2008, 2007 and 2006,
    respectively.(c)

    
    As of December 31, 2006, the Company adopted accounting
    guidance that requires a company who sponsors one or more
    single-employer defined benefit plans to recognize the
    overfunded or underfunded status of a defined benefit
    postretirement plan as an asset or liability in its statement of
    financial position and to recognize changes in that funded
    status in the year in which the changes occur through other
    comprehensive income. The Companys postretirement benefit
    plans are unfunded. Recognition of the accumulated
    postretirement benefit obligation, measured as of
    December 31, 2009, increased the liability for
    postretirement benefits by $0.7 million, gross of deferred
    tax benefit, and decreased accumulated other comprehensive
    income by $0.6 million. Recognition of the accumulated
    postretirement benefit obligation, measured as of
    December 31, 2008, decreased the liability for
    postretirement benefits by $1.2 million, gross of deferred
    tax benefit, and increased accumulated other comprehensive
    income by $0.5 million. Recognition of the accumulated
    postretirement benefit obligation, measured as of
    December 31, 2007, decreased the liability for
    postretirement benefits by $3.4 million, gross of deferred
    tax benefit, and increased accumulated other comprehensive
    income by $2.5 million. Recognition of the accumulated
    postretirement benefit obligation, measured as of
    December 31, 2006, increased the liability for
    postretirement benefits by $4.7 million, gross of deferred
    tax benefit, and decreased accumulated other comprehensive
    income by $2.7 million.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K.
  Critical
    Accounting Policies
    Reserves
    for Unpaid Losses and Loss Adjustment Expenses and
    Reinsurance
     18




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##### Table of Contents



and/or and/or and/or and/or
    sub-line
  Gross Case Loss


Gross IBNR Loss


Total Grossand LAE Reserves


and LAE Reserves


ReservesContract

$
54,312


$
232,575


$
286,887Commercial


57,248



50,155



107,403Fidelity and other


2,926



8,907



11,833Total

$
114,486


$
291,637


$
406,123         
    Historical development method, sometimes referred to as a link
    ratio method;
    Bornhuetter-Ferguson method on both a paid and incurred basis;
    Average hindsight outstanding projection method;
    Frequency-severity method; and
    Loss ratio method.    Historical Development Method
   19




---



##### Table of Contents



Bornhuetter-Ferguson Method
  and/or
    Average Hindsight Outstanding Method
    Frequency-Severity Method
    Loss Ratio Method
     20




---



##### Table of Contents



sub-lines sub-line, sub-lines
    
    Current claim activity, including the frequency and severity of
    current claims;
    Changes in underwriting standards and business mix such as the
    Companys efforts to reduce exposures to large commercial
    bonds;
    Changes in the claims handling process;
    Potential changes in the Companys reinsurance
    program; and
    Current economic conditions, especially corporate default rates
    and the condition of the construction economy.      December 31,2009


2008Gross basis:Recorded loss reserves

$
406,123


$
428,724Actuarial point estimate


383,378



411,957Difference

$
22,745


$
16,767Difference as a % of actuarial point estimate


5.9
%


4.1
%Net basis:Recorded loss reserves

$
355,155


$
345,033Actuarial point estimate


323,575



327,194Difference

$
31,580


$
17,839Difference as a % of actuarial point estimate


9.8
%


5.5
%    21




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##### Table of Contents



and/or
    sub-lines sub-lines
  and/or and/or
 22




---



##### Table of Contents



Investments
  available-for-sale.
  other-than-temporarily other-than-temporarily
  other-than-temporary
      Intangible
    Assets
     23




---



##### Table of Contents



Insurance
    Premiums
      Deferred
    Policy Acquisition Costs
    Results
    of Operations
  Financial
    Measures
       24




---



##### Table of Contents



Comparison
    of CNA Surety Actual Results for the Years Ended
    December 31, 2009, 2008 and 2007
  Analysis
    of Net Income
      Results
    of Insurance Operations
    Years Ended December 31,2009


2008


2007Gross written premium

$
438,305


$
467,127


$
471,660Net written premium

$
411,034


$
431,679


$
428,289Net earned premium

$
421,872


$
431,696


$
421,506Net losses and loss adjustment expenses

$
69,416


$
80,844


$
103,124Net commissions, brokerage and other underwriting expenses

$
233,427


$
235,420


$
227,412Loss ratio


16.5
%


18.7
%


24.5
%Expense ratio


55.3



54.5



54.0Combined ratio


71.8
%


73.2
%


78.5
%   Premiums
    Written/Earned
  and/or
 25




---



##### Table of Contents



sub-line
  Years Ended December 31,2009


2008


2007Contract

$
274,848


$
300,236


$
305,624Commercial


133,548



135,999



134,828Fidelity and other


29,909



30,892



31,208$
438,305


$
467,127


$
471,660        26




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##### Table of Contents



sub-line
  Years Ended December 31,2009


2008


2007Contract

$
250,793


$
268,085


$
266,749Commercial


130,332



132,702



130,332Fidelity and other


29,909



30,892



31,208$
411,034


$
431,679


$
428,289   sub-line
  Years Ended December 31,2009


2008


2007Contract

$
259,324


$
266,551


$
259,362Commercial


131,923



133,699



130,541Fidelity and other


30,625



31,446



31,603$
421,872


$
431,696


$
421,506       Net Loss
    Ratio
       27




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##### Table of Contents



Expense
    Ratio
      Investment
    Income and Realized Investment Gains/Losses
      Years Ended December 31,2009


2008


2007Net realized investment gains (losses):Fixed income securities:Gross realized investment gains

$
1,731


$



$
345Gross realized investment losses:Other-than-temporary
    impairment losses


(116
)


(978
)


(941
)Realized losses from sales


(393
)


(19
)


(14
)Total gross realized investment losses


(509
)


(997
)


(955
)Net realized investment gains (losses) on fixed income securities


1,222



(997
)


(610
)Equity securities:Gross realized investment gains


44



13



147Gross realized investment losses:Other-than-temporary
    impairment losses


(46
)


(343
)


Realized losses from sales


(20
)


(46
)


(1
)Total gross realized investment losses


(66
)


(389
)


(1
)Net realized investment (losses) gains on equity securities


(22
)


(376
)


146Other


(1
)


(1
)


19Net realized investment losses

$
1,199


$
(1,374
)

$
(445
)Net change in unrealized gains (losses):Fixed income securities

$
54,123


$
(20,816
)

$
2,032Equity securities


181



(106
)


(53
)Total net change in unrealized gains (losses)

$
54,304


$
(20,922
)

$
1,979Net realized gains (losses) and change in unrealized gains
    (losses)

$
55,503


$
(22,296
)

$
1,534  28




---



##### Table of Contents



Interest
    Expense
    Income
    Taxes
    Exposure
    Management
        Excess of
    Loss Reinsurance
     29




---



##### Table of Contents



2008
    Third Party Reinsurance
    2009 Third Party Reinsurance
    2010 Third Party Reinsurance
    Related
    Party Reinsurance
       30




---



##### Table of Contents



31




---



##### Table of Contents



Liquidity
    and Capital Resources
           32




---



##### Table of Contents



30-year
            Regulation S-K
 33




---



##### Table of Contents



Contractual Obligations as ofDecember 31, 2009

2010


2011


2012


2013


2014


Thereafter


Total(In millions)Debt(a)

$
1.2


$
1.1


$
1.1


$
1.1


$
1.1


$
52.9


$
58.5Operating leases


2.0



1.9



0.9















4.8Loss and loss adjustment expense reserves


133.0



86.9



71.6



44.4



22.5



47.7



406.1Other long-term
    liabilities(b)


1.5



1.2



1.0



0.4



0.4



9.9



14.4Total

$
137.7


$
91.1


$
74.6


$
45.9


$
24.0


$
110.5


$
483.8     (a)

    
    Reflects expected principal and interest payments.(b)

    
    Reflects unfunded postretirement benefit plans and long-term
    incentive plan payments to certain executives.  12-month
         34




---



##### Table of Contents



Insurance
    Regulation and Supervision
     35




---



##### Table of Contents



Financial
    Condition
  Investment
    Portfolio
    December 31,





December 31,2009





2008Estimated


% of


Estimated


% ofFair Value


Total


Fair Value


TotalFixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
18,348



1.4
%

$
36,659



3.6
%U.S. Agencies


10,131



0.8



37,592



3.6Collateralized mortgage obligations  residential


32,092



2.5



36,655



3.5Mortgage pass-through securities  residential


96,557



7.6



73,692



7.1Obligations of states and political subdivisions


728,568



57.5



696,163



67.2Corporate bonds


344,109



27.1



93,476



9.0Collateralized mortgage obligations  commercial


9,673



0.8



29,378



2.9Other asset-backed securities:Second mortgages/home equity loans  residential


4,761



0.4



4,997



0.5Consumer credit receivables


11,583



0.9



15,531



1.5Other


10,401



0.9



10,503



1.0Total fixed income securities


1,266,223



99.9
%


1,034,646



99.9
%Equity securities


1,610



0.1



1,231



0.1Total

$
1,267,833



100.0
%

$
1,035,877



100.0
%    36




---



##### Table of Contents



Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated


UnrealizedDecember 31, 2009

or Cost


Gains


12 Months


12 Months


Fair Value


OTTI
    Losses(a)Fixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
17,378


$
970


$



$



$
18,348


$
U.S. Agencies


9,794



337











10,131



Collateralized mortgage obligations  residential


30,709



1,383











32,092



Mortgage pass-through securities  residential


94,453



2,336



(232
)






96,557



Obligations of states and political subdivisions


696,505



35,847



(882
)


(2,902
)


728,568



Corporate bonds


334,136



11,478



(1,248
)


(257
)


344,109



Collateralized mortgage obligations  commercial


10,024











(351
)


9,673



Other asset-backed securities:Second mortgages/home equity loans  residential


5,501











(740
)


4,761



(1,399
)Consumer credit receivables


11,055



528











11,583



Other


9,715



686











10,401



Total fixed income securities


1,219,270



53,565



(2,362
)


(4,250
)


1,266,223


$
(1,399
)Equity securities


1,429



181











1,610Total

$
1,220,699


$
53,746


$
(2,362
)

$
(4,250
)

$
1,267,833     (a)

    
    The unrealized loss position of this security has improved to
    $0.5 million at December 31, 2009. 37




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##### Table of Contents



Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated FairDecember 31, 2008

or Cost


Gains


12 Months


12 Months


ValueFixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
33,140


$
3,519


$



$



$
36,659U.S. Agencies


36,476



1,116











37,592Collateralized mortgage obligations  residential


35,671



984











36,655Mortgage pass-through securities  residential


72,203



1,489











73,692Obligations of states and political subdivisions


697,305



19,730



(6,929
)


(13,943
)


696,163Corporate bonds


96,048



1,711



(2,430
)


(1,853
)


93,476Collateralized mortgage obligations  commercial


35,025







(2,040
)


(3,607
)


29,378Other asset-backed securities:Second mortgages/home equity loans  residential


7,956







(779
)


(2,180
)


4,997Consumer credit receivables


17,239







(1,708
)






15,531Other


10,753



23



(273
)






10,503Total fixed income securities


1,041,816



28,572



(14,159
)


(21,583
)


1,034,646Equity securities


1,231















1,231Total

$
1,043,047


$
28,572


$
(14,159
)

$
(21,583
)

$
1,035,877   Form 10-K.
    2009


2008Credit
    Rating(a)

Fair Value


% of Total


Fair Value


% of TotalAAA

$
475,870



37.6
%

$
508,247



49.1
%AA


476,641



37.6



393,020



38.0A


277,528



21.9



120,309



11.6BBB


14,757



1.2



7,951



0.8Non-investment grade


21,427



1.7



5,119



0.5Total

$
1,266,223



100.0
%

$
1,034,646



100.0
%     (a)

    
    Securities are categorized using the S&P rating. If a
    security is not rated by S&P, the Moodys rating is
    used. At December 31, 2009 and 2008, all of the
    Companys fixed income securities were rated by S&P or
    Moodys. 38




---



##### Table of Contents



% ofEstimated


% ofFair


UnrealizedContractual Maturity

Value


LossDue after one year through five years


10
%


6
%Due after five years through ten years


34



24Due after ten years


36



50Asset-backed securities


20



20Total


100
%


100
%     December 31, 2009


December 31, 2008Estimated


Gross


Estimated


GrossUnrealized Loss Aging

Fair Value


Unrealized Loss


Fair Value


Unrealized LossFixed income securities:Investment
    grade(a):0-6 months

$
162,087


$
2,362


$
109,973


$
3,0957-12 months










121,419



11,06413-24 months


11,176



469



81,395



12,010Greater than 24 months


32,932



2,065



31,373



7,393Total investment grade


206,195



4,896



344,160



33,562Non-investment grade:Greater than 24 months


17,346



1,716



2,077



2,180Total

$
223,541


$
6,612


$
346,237


$
35,742     (a)

    
    Investment grade is determined by using the S&P rating. If
    a security is not rated by S&P, the Moodys rating is
    used. As of December 31, 2009 and December 31, 2008,
    all of the Companys fixed income securities were rated by
    S&P or Moodys.  available-for-sale,
 39




---



##### Table of Contents



other-than-temporary.
  other-than-temporary other-than-temporary
  other-than-temporary
  other-than-temporarily other-than-temporarily
  other-than-temporary
  other-than-temporarily
      other-than-temporarily
 40




---



##### Table of Contents



Gross Unrealized Losses


EstimatedDecember 31, 2009

AAA


AA


A


BBB


Total


Count


Fair ValueFixed income securities:Investment
    grade(a):U.S. Treasury securities and obligations of U.S. Government and
    agencies:Mortgage pass-through securities  residential

$
232


$



$



$



$
232



3


$
31,084Obligations of states and political subdivisions


636



1,086



889







2,611



17



85,932Corporate bonds






256



992



257



1,505



20



77,056Collateralized mortgage obligations  commercial


351















351



2



9,673Other asset-backed securities:Second mortgages/home equity loans  residential


197















197



1



2,450Total investment grade


1,416



1,342



1,881



257



4,896



43



206,195Non-investment grade:Obligations of states and political subdivisions


















1,173



2



15,035Other asset-backed securities:Second mortgages/home equity loans  residential


















543



1



2,311Total non-investment grade


















1,716



3



17,346Total

$
1,416


$
1,342


$
1,881


$
257


$
6,612



46


$
223,541     (a)

    
    Securities are categorized using the S&P rating. If a
    security is not rated by S&P, the Moodys rating is
    used. At December 31, 2009, all of the Companys fixed
    income securities were rated by S&P or Moodys.    sub-prime other-than-temporarily sub-prime
 41




---



##### Table of Contents



sub-prime
            Risk-Based
    Capital (RBC) and Other Regulatory Ratios
  state-by-state
 42




---



##### Table of Contents



Impact of
    Pending Accounting Standards
  No. 2009-16,
  No. 2009-17,
  FORWARD-LOOKING
    STATEMENTS
        
    general economic and business conditions; 43




---



##### Table of Contents




    changes in financial markets such as fluctuations in interest
    rates, long-term periods of low interest rates, credit
    conditions and currency, commodity and stock prices;
    the ability of the Companys contract principals to fulfill
    their bonded obligations;
    the effects of corporate bankruptcies on surety bond claims, as
    well as on capital markets;
    changes in foreign or domestic political, social and economic
    conditions;
    regulatory initiatives and compliance with governmental
    regulations, judicial decisions, including interpretation of
    policy provisions, decisions regarding coverage, trends in
    litigation and the outcome of any litigation involving the
    Company, and rulings and changes in tax laws and regulations;
    regulatory limitations, impositions and restrictions upon the
    Company, including the effects of assessments and other
    surcharges for guaranty funds and other mandatory pooling
    arrangements;
    the impact of competitive products, policies and pricing and the
    competitive environment in which the Company operates, including
    changes in the Companys books of business;
    product and policy availability and demand and market responses,
    including the level of ability to obtain rate increases and
    decline or non-renew underpriced accounts, to achieve premium
    targets and profitability and to realize growth and retention
    estimates;
    development of claims and the impact on loss reserves, including
    changes in claim settlement practices;
    the performance of reinsurance companies under reinsurance
    contracts with the Company;
    results of financing efforts, including the Companys
    ability to access capital markets;
    changes in the Companys composition of operating segments;
    the sufficiency of the Companys loss reserves and the
    possibility of future increases in reserves;
    the risks and uncertainties associated with the Companys
    loss reserves; and,
    the possibility of further changes in the Companys ratings
    by ratings agencies, including the inability to access certain
    markets or distribution channels and the required
    collateralization of future payment obligations as a result of
    such changes, and changes in rating agency policies and
    practices.    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK     44




---



##### Table of Contents



HypotheticalEstimated Fair


PercentageHypothetical


Value After


IncreaseFair Value at


Change in


Hypothetical


(Decrease) inDecember 31,


Interest Rate


Change in


Stockholders2009


(bp=basis points)


Interest Rate


Equity(Dollars in thousands)U.S. Government and government agencies and authorities

$
157,128



200 bp increase


$
144,937



(0.9
)%150 bp increase



148,310



(0.6
)100 bp increase



151,570



(0.4
)50 bp increase



154,580



(0.2
)States, municipalities and political subdivisions


728,568



200 bp increase



641,122



(6.2
)150 bp increase



661,735



(4.7
)100 bp increase



683,176



(3.2
)50 bp increase



705,453



(1.6
)Corporate bonds


344,109



200 bp increase



310,703



(2.4
)150 bp increase



318,610



(1.8
)100 bp increase



326,806



(1.2
)50 bp increase



335,301



(0.6
)Mortgage-backed and asset-backed


36,418



200 bp increase



34,525



(0.1
)150 bp increase



34,982



(0.1
)100 bp increase



35,450



(0.1
)50 bp increase



35,928



Total fixed income securities
    available-for-sale

$
1,266,223



200 bp increase



1,131,287



(9.6
)150 bp increase



1,163,637



(7.2
)100 bp increase



1,197,002



(4.9
)50 bp increase



1,231,262



(2.4
)   45




---



##### Table of Contents



HypotheticalEstimated Fair


PercentageHypothetical


Value After


IncreaseFair Value at


Change in


Hypothetical


(Decrease) inDecember 31,


Interest Rate


Change in


Stockholders2008


(bp=basis points)


Interest Rate


Equity(Dollars in thousands)U.S. Government and government agencies and authorities

$
184,598



200 bp increase


$
172,966



(1.0
)%100 bp increase



179,485



(0.4
)100 bp decrease



187,485



0.2200 bp decrease



189,197



0.4States, municipalities and political subdivisions


696,163



200 bp increase



613,030



(7.0
)100 bp increase



652,614



(3.7
)100 bp decrease



743,635



4.0200 bp decrease



786,829



7.7Corporate bonds


93,476



200 bp increase



84,743



(0.7
)100 bp increase



88,962



(0.4
)100 bp decrease



98,115



0.4200 bp decrease



101,424



0.7Mortgage-backed and asset-backed


60,409



200 bp increase



56,769



(0.3
)100 bp increase



58,563



(0.2
)100 bp decrease



62,039



0.1200 bp decrease



62,557



0.2Total fixed income securities
    available-for-sale

$
1,034,646



200 bp increase



927,508



(9.1
)100 bp increase



979,624



(4.7
)100 bp decrease



1,091,274



4.8200 bp decrease



1,140,007



8.9  46




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
  other-than-temporary
  
    47




---



##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
      Internal Control 
    Integrated Framework.
  Form 10-K.
  
   48




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            other-than-temporary
  Internal Control  Integrated Framework
  
    49




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2009


2008(Amounts in thousands, except per share data)AssetsInvested assets:Fixed income securities, at fair value (amortized cost:
    $1,219,270 and $1,041,816)

$
1,266,223


$
1,034,646Equity securities, at fair value (cost: $1,429 and $1,231)


1,610



1,231Short-term investments, at amortized cost (approximates fair
    value)


48,999



80,606Total invested assets


1,316,832



1,116,483Cash


5,822



9,596Deferred policy acquisition costs


99,836



102,092Insurance receivables:Premiums, including $9,753 and $14,303 from affiliates, (net of
    allowance for doubtful accounts: $1,110 and $1,307)


33,392



36,948Reinsurance, including $0 and $46,122 from affiliates


48,645



91,452Deposit with affiliated ceding company


26,878



29,693Goodwill and other intangible assets (net of accumulated
    amortization: $25,523 and $25,523)


138,785



138,785Property and equipment, at cost (less accumulated depreciation
    and amortization: $37,514 and $33,506)


19,681



24,378Prepaid reinsurance premiums, including $0 and $105 from
    affiliates


210



420Accrued investment income


15,832



13,464Other assets


3,122



2,208Total assets

$
1,709,035


$
1,565,519LiabilitiesReserves:Unpaid losses and loss adjustment expenses

$
406,123


$
428,724Unearned premiums


247,776



258,824Total reserves


653,899



687,548Long-term debt


30,930



30,892Deferred income taxes, net


28,065



9,647Reinsurance and other payables to affiliates


548



1,680Accrued expenses


18,586



20,056Liability for postretirement benefits


10,718



9,283Payable for securities purchased


1,356



8,398Federal income tax payable


13,389



1,581Other liabilities


28,460



29,139Total liabilities


785,951



798,224Commitments and contingencies (See Notes 6, 7, & 8)Stockholders EquityPreferred stock, par value $.01 per share, 20,000 shares
    authorized; none issued and outstanding






Common stock, par value $.01 per share, 100,000 shares
    authorized; 45,635 shares issued and 44,268 shares
    outstanding at December 31, 2009 and 45,544 shares
    issued and 44,168 shares outstanding at December 31,
    2008


456



455Additional paid-in capital


279,388



276,255Retained earnings


627,505



509,644Accumulated other comprehensive income (loss)


30,406



(4,286
)Treasury stock, 1,367 and 1,376 shares, at cost


(14,671
)


(14,773
)Total stockholders equity


923,084



767,295Total liabilities and stockholders equity

$
1,709,035


$
1,565,519    50




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
  Years Ended December 31,2009


2008


2007(Amounts in thousands,except per share data)Revenues:Net earned premium

$
421,872


$
431,696


$
421,506Net investment income


50,371



47,302



44,636Net realized investment gains (losses):Other-than-temporary
    impairment losses


(1,870
)


(1,321
)


(941
)Portion of
    other-than-temporary
    impairment losses recognized in other comprehensive income
    (before taxes)


1,708







Net impairment losses recognized in earnings


(162
)


(1,321
)


(941
)Net realized investment gains (losses), excluding impairment
    losses on
    available-for-sale
    securities


1,361



(53
)


496Total net realized investment gains (losses)


1,199



(1,374
)


(445
)Total revenues


473,442



477,624



465,697Expenses:Net losses and loss adjustment expenses


69,416



80,844



103,124Net commissions, brokerage and other underwriting expenses


233,427



235,420



227,412Interest expense


1,391



2,148



2,918Total expenses


304,234



318,412



333,454Income before income taxes


169,208



159,212



132,243Income tax expense


51,347



48,809



39,747Net income

$
117,861


$
110,403


$
92,496Earnings per common share

$
2.66


$
2.50


$
2.10Earnings per common share, assuming dilution

$
2.65


$
2.49


$
2.09Weighted average shares outstanding


44,247



44,145



44,000Weighted average shares outstanding, assuming dilution


44,397



44,260



44,267    51




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Common














AccumulatedStock





Additional








Other


Treasury


TotalShares


Common


Paid-in


Comprehensive


Retained


Comprehensive


Stock


StockholdersOutstanding


Stock


Capital


Income


Earnings


Income (Loss)


At Cost


Equity(Amounts in thousands)Balance, January 1, 2007


43,872


$
453


$
268,651






$
306,745


$
4,993


$
(14,940
)

$
565,902Comprehensive income:Net income





$



$



$
92,496


$
92,496


$



$



$
92,496Other comprehensive income:Change in unrealized gains on securities, after income tax
    expense of $693 (net of reclassification adjustment of ($120),
    after income tax benefit of $64)














1,286







1,286







1,286Net change related to postretirement benefits, after income tax
    expense of $1,117














2,521







2,521







2,521Total comprehensive income













$
96,303















Stock-based compensation










1,892



















1,892Stock options exercised and other


249



2



3,526















80



3,608Balance, December 31, 2007


44,121


$
455


$
274,069






$
399,241


$
8,800


$
(14,860
)

$
667,705Comprehensive income:Net income





$



$



$
110,403


$
110,403


$



$



$
110,403Other comprehensive income:Change in unrealized gains (losses) on securities, after income
    tax benefit of $7,323 (net of reclassification adjustment of
    ($282), after income tax benefit of $152)














(13,599
)






(13,599
)






(13,599
)Net change related to postretirement benefits, after income tax
    expense of $565














513







513







513Total comprehensive income













$
97,317















Stock-based compensation










1,693



















1,693Stock options exercised and other


47







493















87



580Balance, December 31, 2008


44,168


$
455


$
276,255






$
509,644


$
(4,286
)

$
(14,773
)

$
767,295Comprehensive income:Net income





$



$



$
117,861


$
117,861


$



$



$
117,861Other comprehensive income (loss):Change in unrealized gains (losses) on securities, after income
    tax expense of $19,196 (net of reclassification adjustment of
    ($3,242), after income tax benefit of $1,746)














35,651







35,651







35,651Other-than-temporary
    impairment losses not recognized in the Consolidated Statements
    of Income, after income tax benefit of $190














(353
)






(353
)






(353
)Net change related to postretirement benefits, after income tax
    benefit of $236














(606
)






(606
)






(606
)Total comprehensive income













$
152,553















Stock-based compensation










1,990



















1,990Stock options exercised and other


100



1



1,143















102



1,246Balance, December 31, 2009


44,268


$
456


$
279,388






$
627,505


$
30,406


$
(14,671
)

$
923,084    52




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2009


2008


2007(Amounts in thousands)Cash Flows from Operating Activities:Net income

$
117,861


$
110,403


$
92,496Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


564



443



393Depreciation and amortization


6,055



5,809



6,179Amortization of bond premium, net


4,862



2,888



369Loss on disposal or impairment of property and equipment


4,934



1,155



279Net realized investment (gains) losses


(1,199
)


1,374



445Stock-based compensation


1,990



1,693



1,892Deferred income tax benefit


(448
)


(1,406
)


(1,523
)Changes in:Insurance receivables


45,799



34,593



(8,212
)Reserve for unearned premiums


(11,048
)


(106
)


5,127Reserve for unpaid losses and loss adjustment expenses


(22,601
)


(44,118
)


38,618Deposit with affiliated ceding company


2,815



4,951



(1,499
)Deferred policy acquisition costs


2,256



2,188



(1,343
)Reinsurance and other payables to affiliates


(1,132
)


1,037



477Prepaid reinsurance premiums


210



90



1,655Accrued expenses


(1,470
)


1,783



(1,974
)Other assets and liabilities


8,536



1,435



(4,173
)Net cash provided by operating activities


157,984



124,212



129,206Cash Flows from Investing Activities:Fixed income securities:Purchases


(362,262
)


(183,949
)


(350,480
)Maturities


124,428



62,802



55,357Sales


56,654



24,402



114,303Purchases of equity securities


(868
)


(550
)


(822
)Proceeds from the sale of equity securities


648



626



844Changes in short-term investments


31,693



(30,403
)


56,897Purchases of property and equipment, net


(6,255
)


(6,952
)


(5,838
)Changes in payables for securities purchased


(7,042
)


8,398



Other, net






200



(9
)Net cash (used in) investing activities


(163,004
)


(125,426
)


(129,748
)Cash Flows from Financing Activities:Employee stock option exercises and other


1,246



580



3,608Net cash provided by financing activities


1,246



580



3,608(Decrease) increase in cash


(3,774
)


(634
)


3,066Cash at beginning of period


9,596



10,230



7,164Cash at end of period

$
5,822


$
9,596


$
10,230Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest

$
1,427


$
2,154


$
2,837Income taxes

$
39,793


$
46,600


$
42,219    53




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Significant
    Accounting Policies  Formation
    of CNA Surety Corporation and Merger
    Principles
    of Consolidation
    Estimates
    Investments
  available-for-sale,
  other-than-temporary
  other-than-temporary
 54




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred
    Policy Acquisition Costs
    Intangible
    Assets
        Reserves
    for Unpaid Losses and Loss Adjustment Expenses
   55




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Insurance
    Premiums
      Reinsurance
    Stock-Based
    Compensation
    Income
    Taxes
      Property
    and Equipment
   56




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Earnings
    Per Share
      Years Ended December 31,2009


2008


2007Net income

$
117,861


$
110,403


$
92,496Shares:Weighted average shares outstanding


44,168



44,121



43,872Weighted average shares of options exercised and additional
    stock issuance


79



24



128Total weighted average shares outstanding


44,247



44,145



44,000Effect of dilutive options


150



115



267Total weighted average shares outstanding, assuming dilution


44,397



44,260



44,267Earnings per share

$
2.66


$
2.50


$
2.10Earnings per share, assuming dilution

$
2.65


$
2.49


$
2.09     Subsequent
    Events
    Adopted
    Accounting Pronouncements
   57




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
                 58




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Pending
    Accounting Pronouncements
  No. 2009-16,
  No. 2009-17,
 59




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    Investments    Years Ended December 31,2009


2008


2007Investment income:Fixed income securities

$
51,060


$
46,134


$
39,990Equity securities


39



56



72Short-term investments


127



1,340



4,265Other


62



45



Total investment income on
    available-for-sale
    securities


51,288



47,575



44,327Investment income on deposit with affiliated ceding company


335



912



1,611Investment expenses


(1,252
)


(1,185
)


(1,302
)Net investment income

$
50,371


$
47,302


$
44,636   available-for-sale
  Years Ended December 31,2009


2008


2007Net realized investment gains (losses):Fixed income securities:Gross realized investment gains

$
1,731


$



$
345Gross realized investment losses:Other-than-temporary
    impairment losses


(116
)


(978
)


(941
)Realized losses from sales


(393
)


(19
)


(14
)Total gross realized investment losses


(509
)


(997
)


(955
)Net realized investment gains (losses) on fixed income securities


1,222



(997
)


(610
)Equity securities:Gross realized investment gains


44



13



147Gross realized investment losses:Other-than-temporary
    impairment losses


(46
)


(343
)


Realized losses from sales


(20
)


(46
)


(1
)Total gross realized investment losses


(66
)


(389
)


(1
)Net realized investment (losses) gains on equity securities


(22
)


(376
)


146Other


(1
)


(1
)


19Net realized investment gains (losses)


1,199



(1,374
)


(445
)Net change in unrealized gains (losses)Fixed income securities

$
54,123


$
(20,816
)

$
2,032Equity securities


181



(106
)


(53
)Total net change in unrealized gains (losses)

$
54,304


$
(20,922
)

$
1,979Net realized gains (losses) and change in unrealized gains
    (losses)

$
55,503


$
(22,296
)

$
1,534   other-than-temporary
 60




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporary other-than-temporary other-than-temporary
    Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated


UnrealizedDecember 31, 2009

or Cost


Gains


12 Months


12 Months


Fair Value


OTTI
    Losses(a)Fixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
17,378


$
970


$



$



$
18,348


$
U.S. Agencies


9,794



337











10,131



Collateralized mortgage obligations  residential


30,709



1,383











32,092



Mortgage pass-through securities  residential


94,453



2,336



(232
)






96,557



Obligations of states and political subdivisions


696,505



35,847



(882
)


(2,902
)


728,568



Corporate bonds


334,136



11,478



(1,248
)


(257
)


344,109



Collateralized mortgage obligations  commercial


10,024











(351
)


9,673



Other asset-backed securities:Second mortgages/home equity loans  residential


5,501











(740
)


4,761



(1,399
)Consumer credit receivables


11,055



528











11,583



Other


9,715



686











10,401



Total fixed income securities


1,219,270



53,565



(2,362
)


(4,250
)


1,266,223


$
(1,399
)Equity securities


1,429



181











1,610Total

$
1,220,699


$
53,746


$
(2,362
)

$
(4,250
)

$
1,267,833     (a)

    
    The unrealized loss position of this security has improved to
    $0.5 million at December 31, 2009. 61




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


EstimatedDecember 31, 2008

or Cost


Gains


12 Months


12 Months


Fair ValueFixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
33,140


$
3,519


$



$



$
36,659U.S. Agencies


36,476



1,116











37,592Collateralized mortgage obligations-residential


35,671



984











36,655Mortgage pass-through securities-residential


72,203



1,489











73,692Obligations of states and political subdivisions


697,305



19,730



(6,929
)


(13,943
)


696,163Corporate bonds


96,048



1,711



(2,430
)


(1,853
)


93,476Collateralized mortgage obligations-commercial


35,025







(2,040
)


(3,607
)


29,378Other asset-backed securities:Second mortgages/home equity loans-residential


7,956







(779
)


(2,180
)


4,997Consumer credit receivables


17,239







(1,708
)






15,531Other


10,753



23



(273
)






10,503Total fixed income securities


1,041,816



28,572



(14,159
)


(21,583
)


1,034,646Equity securities


1,231















1,231Total

$
1,043,047


$
28,572


$
(14,159
)

$
(21,583
)

$
1,035,877   other-than-temporary other-than-temporary.
  other-than-temporary other-than-temporary
  other-than-temporary
 62




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporarily other-than-temporarily
  other-than-temporary
  other-than-temporarily
      other-than-temporarily
  sub-prime
 63




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31,2009Beginning balance

$
Credit losses for which an OTTI loss was not previously
    recognized


116Credit losses for which an OTTI loss was previously recognized


Ending balance

$
116   other-than-temporary
  other-than-temporary
  other-than-temporary
  other-than-temporary
    2009


2008Amortized


Estimated Fair


Amortized


Estimated FairCost


Value


Cost


ValueFixed income securities:Due within one year

$
13,006


$
13,224


$
4,535


$
4,590Due after one year but within five years


304,654



321,144



216,232



222,344Due after five years but within ten years


447,485



468,254



345,285



355,171Due after ten years


292,668



298,534



296,917



281,7851,057,813



1,101,156



862,969



863,890Mortgage pass-through securities, collateralized mortgage
    obligations and asset-backed securities


161,457



165,067



178,847



170,756$
1,219,270


$
1,266,223


$
1,041,816


$
1,034,646  64




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    % of


% ofEstimated


UnrealizedContractual Maturity

Fair Value


LossDue after one year through five years


10
%


6
%Due after five years through ten years


34



24Due after ten years


36



50Asset-backed securities


20



20Total


100
%


100
%     December 31, 2009


December 31, 2008Gross





GrossEstimated


Unrealized


Estimated


UnrealizedUnrealized Loss Aging

Fair Value


Loss


Fair Value


LossFixed income securities:Investment
    grade(a):0-6 months

$
162,087


$
2,362


$
109,973


$
3,0957-12 months










121,419



11,06413-24 months


11,176



469



81,395



12,010Greater than 24 months


32,932



2,065



31,373



7,393Total investment grade


206,195



4,896



344,160



33,562Non-investment grade:Greater than 24 months


17,346



1,716



2,077



2,180Total

$
223,541


$
6,612


$
346,237


$
35,742     (a)

    
    Investment grade is determined by using the S&P rating. If
    a security is not rated by S&P, the Moodys rating is
    used. As of December 31, 2009 and December 31, 2008,
    all of the Companys fixed income securities were rated by
    S&P or Moodys.   65




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Gross Unrealized Losses


Estimated FairDecember 31, 2009

AAA


AA


A


BBB


Total


Count


ValueFixed income securities:Investment
    grade(a):U.S. Treasury securities and obligations of U.S. Government and
    agencies:Mortgage pass-through securities  residential

$
232


$



$



$



$
232



3


$
31,084Obligations of states and political subdivisions


636



1,086



889







2,611



17



85,932Corporate bonds






256



992



257



1,505



20



77,056Collateralized mortgage obligations  commercial


351















351



2



9,673Other asset-backed securities:Second mortgages/home equity loans  residential


197















197



1



2,450Total investment grade


1,416



1,342



1,881



257



4,896



43



206,195Non-investment grade:Obligations of states and political subdivisions


















1,173



2



15,035Other asset-backed securities:Second mortgages/home equity loans  residential


















543



1



2,311Total non-investment grade


















1,716



3



17,346Total

$
1,416


$
1,342


$
1,881


$
257


$
6,612



46


$
223,541     (a)

    
    Securities are categorized using the S&P rating. If a
    security is not rated by S&P, the Moodys rating is
    used. At December 31, 2009, all of the Companys fixed
    income securities were rated by S&P or Moodys.     66




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          sub-prime sub-prime other-than-temporarily
 67




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        3.
    Debt  30-year
           68




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    Fair
    Value of Financial Instruments    
    Level 1  Quoted prices for identical
    instruments in active markets.
    Level 2  Quoted prices for similar
    instruments in active markets; quoted prices for identical or
    similar instruments in markets that are not active; and
    model-derived valuations in which all significant inputs are
    observable in active markets.
    Level 3  Valuations derived from
    valuation techniques in which one or more significant inputs are
    unobservable.      Fixed
    Income Securities
    Equity
    Securities
    Short-Term
    Investments
   69




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2009Fair Value Measurements Using


Assets at FairLevel 1


Level 2


Level 3


ValueAssets:Fixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
18,348


$



$



$
18,348U.S. Agencies






10,131







10,131Collateralized mortgage obligations  residential






32,092







32,092Mortgage pass-through securities  residential






96,557







96,557Obligations of states and political subdivisions






728,568







728,568Corporate bonds






344,109







344,109Collateralized mortgage obligations  commercial






9,673







9,673Other asset-backed securities:Second mortgages/home equity loans  residential






4,761







4,761Consumer credit receivables






11,583







11,583Other






10,401







10,401Total fixed income securities


18,348



1,247,875







1,266,223Equity securities at fair value


1,610











1,610Short-term investments at fair
    value(a)


15,412



33,587







48,999Total assets

$
35,370


$
1,281,462


$



$
1,316,832     (a)

    
    Includes commercial paper, U.S. Government agency discount notes
    and money market funds.  70




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2008Fair Value Measurements Using


Assets at FairLevel 1


Level 2


Level 3


ValueAssets:Fixed income securities:U.S. Treasury securities and obligations of U.S. Government and
    agencies:U.S. Treasury

$
36,659


$



$



$
36,659U.S. Agencies






37,592







37,592Collateralized mortgage obligations  residential






36,655







36,655Mortgage pass-through securities  residential






73,692







73,692Obligations of states and political subdivisions






696,163







696,163Corporate bonds






93,476







93,476Collateralized mortgage obligations  commercial






29,378







29,378Other asset-backed securities:Second mortgages/home equity loans  residential






4,997







4,997Consumer credit receivables






15,531







15,531Other






10,503







10,503Total fixed income securities


36,659



997,987







1,034,646Equity securities at fair value


1,231











1,231Short-term investments at fair
    value(a)


30,616



49,990







80,606Total assets

$
68,506


$
1,047,977


$



$
1,116,483     (a)

    
    Includes commercial paper, U.S. Government agency discount notes
    and money market funds.  5.
    Deferred
    Policy Acquisition Costs and Other Operating Expenses    Years Ended December 31,2009


2008


2007Balance at beginning of period

$
102,092


$
104,280


$
102,937Costs deferred


166,434



171,117



171,689Amortization


(168,690
)


(173,305
)


(170,346
)Balance at end of period

$
99,836


$
102,092


$
104,280  71




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007Amortization of deferred policy acquisition costs

$
168,690


$
173,305


$
170,346Other operating expenses


64,737



62,115



57,066Net commissions, brokerage and other underwriting expenses

$
233,427


$
235,420


$
227,412   6.
    Reinsurance      Years Ended December 31,2009


2008


2007Written


Earned


Written


Earned


Written


EarnedDirect

$
347,646


$
351,519


$
358,625


$
357,771


$
360,877


$
353,594Assumed


90,659



97,833



108,502



109,463



110,783



112,938Ceded


(27,271
)


(27,480
)


(35,448
)


(35,538
)


(43,371
)


(45,026
)Net premiums

$
411,034


$
421,872


$
431,679


$
431,696


$
428,289


$
421,506      72




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Years Ended December 31,2009


2008


2007$


Ratio


$


Ratio


$


RatioGross losses and loss adjustment expenses

$
76,564



17.0
%

$
93,151



19.9
%

$
119,567



25.6
%Ceded losses and loss adjustment expenses


(7,148
)


26.0
%


(12,307
)


34.6
%


(16,443
)


36.5
%Net losses and loss adjustment expenses

$
69,416



16.5
%

$
80,844



18.7
%

$
103,124



24.5
%   Excess of
    Loss Reinsurance
    2008
    Third Party Reinsurance
    2009
    Third Party Reinsurance
   73




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2010
    Third Party Reinsurance
    Related
    Party Reinsurance
         74




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
             75




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    Reserves
    for Losses and Loss Adjustment Expenses    Years Ended December 31,2009


2008


2007Reserves at beginning of year:Gross

$
428,724


$
472,842


$
434,224Ceded reinsurance


83,691



150,496



144,858Net reserves at beginning of year


345,033



322,346



289,366Net incurred loss and loss adjustment expenses:Provision for insured events of current year


123,698



126,345



108,178Decrease in provision for insured events of prior years


(54,282
)


(45,501
)


(5,054
)Total net incurred


69,416



80,844



103,124Net payments attributable to:Current year events


15,571



11,954



14,265Prior year events


43,723



46,203



55,879Total net payments


59,294



58,157



70,144Net reserves at end of year


355,155



345,033



322,346Ceded reinsurance at end of year


50,968



83,691



150,496Gross reserves at end of year

$
406,123


$
428,724


$
472,842          76




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Commitments
    and Contingencies      9.
    Income
    Taxes    2009


2008Deferred tax assets related to:Unearned premium reserve

$
17,478


$
18,286Loss and loss adjustment expense reserve


4,251



4,249Accrued expenses


2,005



2,082Accumulated postretirement benefit obligation


4,322



3,826Unrealized net losses on securities






2,510Policyholder dividends


2,795



3,192Other


2,893



2,722Total deferred tax assets


33,744



36,867Deferred tax liabilities related to:Deferred policy acquisition costs


34,943



35,732Intangible assets


5,650



5,650Unrealized net gains on securities


16,496



Difference between book and tax depreciation


3,292



3,332Other


1,428



1,800Total deferred tax liabilities


61,809



46,514Net deferred tax liability

$
28,065


$
9,647       Years Ended December 31,2009


2008


2007Current tax expense

$
51,795


$
50,215


$
41,270Deferred tax benefit


(448
)


(1,406
)


(1,523
)Total income tax expense

$
51,347


$
48,809


$
39,747  77




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2009


2008


2007Federal statutory rate


35.0
%


35.0
%


35.0
%Tax-exempt income deduction


(5.3
)


(5.3
)


(5.7
)Non-deductible expenses


0.2



0.2



0.2State income tax, net of federal income tax benefit


0.7



0.8



0.9Other


(0.3
)






(0.3
)Total income tax expense


30.3
%


30.7
%


30.1
%       10.
    Employee
    Benefits       78




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2009


2008Reconciliation of benefit obligation:Benefit obligation at beginning of the year

$
9,283


$
10,001Service cost


228



192Interest cost


572



486Actuarial loss (gain)


681



(1,240
)Benefits and expenses paid


(132
)


(251
)Plan participant contributions


60



69Medicare subsidy received


26



26Benefit obligation at end of year

$
10,718


$
9,283      79




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008


2007Amounts not yet recognized in net periodic benefit cost:Net prior service benefit

$
(187
)

$
(349
)

$
(511
)Net actuarial loss


968



288



1,528Total pre-tax accumulated other comprehensive loss (income)

$
781


$
(61
)

$
1,017Pre-tax accumulated other comprehensive (income)
    loss   beginning of year related to postretirement
    benefit obligation

$
(61
)

$
1,017


$
4,657Reclassification adjustments recognized in net periodic benefit
    cost:Amortization of prior service cost


162



162



106Amortization of net actuarial loss


(1
)






(387
)Amounts recognized in AOCI arising during the year:Net actuarial losses (gains)


681



(1,240
)


(3,359
)Pre-tax accumulated other comprehensive loss
    (income)  end of year, related to postretirement
    benefit obligation

$
781


$
(61
)

$
1,017       2009


2008Liability for postretirement benefits

$
10,718


$
9,283Deferred income taxes, net


(4,322
)


(3,826
)Accumulated other comprehensive loss (income), net of tax


231



(375
)     Difference Due toIncluding Effects


Without Effects of


Effects ofof Tax-Free Subsidy


Tax-Free Subsidy


Tax-Free SubsidyDecember 31, 2009

$
10,718


$
12,349


$
1,631December 31, 2008

$
9,283


$
10,931


$
1,648  80




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008


2007Net periodic benefit cost:Service cost

$
228


$
192


$
333Interest cost


572



486



761Amortization of prior service cost (benefit)


(162
)


(162
)


(106
)Net amortization of actuarial loss


1







387Net periodic benefit cost

$
639


$
516


$
1,375   2009


2008


2007Key Assumptions:Discount rate


5.960
%


5.870
%


5.875
%Rate of compensation increases (postretirement sick leave plan
    only)


3.0
%


5.0
%


5.0
%Initial health care cost trend rate, pre-Medicare


9.0
%


9.0
%


10.0
%Initial health care cost trend rate, post-Medicare


9.0
%


9.0
%


10.0
%Ultimate health care cost trend rate


5.0
%


5.0
%


5.0
%Year in which ultimate trend rate is reached


2018



2017



2013Mortality


IRS Prescribed 2008
    Generational
    Mortality



RP 2000 Projected



RP 2000 ProjectedAverage remaining service life  postretirement
    medical benefit plan


11.8 Years



12.3 Years



12.7 YearsAverage life expectancy  postretirement medical
    benefit plan


14.0 Years



14.0 Years



14.3 YearsAverage remaining service life  sick leave plan


11.4 Years



12.3 Years



12.7 Years      81




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Amortization of prior service cost (benefit)

$
(110
)Amortization of net actuarial loss


2Total estimated benefit to be recognized

$
(108
)     Before Impact of Federal Subsidy


Net of Federal Subsidy2010

$
231


$
2002011


262



2272012


299



2602013


354



3112014


477



4282015-2019


3,095



2,788   11.
    Stockholders
    Equity    Equity
    Compensation Plans
       82




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            WeightedAverage OptionShares Subject


Price perto Option


ShareOutstanding options at January 1, 2009


1,221,118


$
14.93Options granted


217,960


$
18.85Options forfeited


(15,560
)

$
17.93Options expired


(14,725
)

$
14.67Options exercised


(90,505
)

$
11.50Outstanding options at December 31, 2009


1,318,288


$
15.78     WeightedAverageShares Subject


Grant DateTo Option


Fair ValueNon-vested options at January 1, 2009


545,095


$
7.29Options granted


217,960


$
8.95Options vested


(208,099
)

$
6.91Options forfeited


(15,560
)

$
7.72Non-vested options at December 31, 2009


539,396


$
8.10  83




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Options Outstanding


Options ExercisableWeighted AverageNumber


Remaining


Weighted Average


Number


Weighted AverageRange of Exercise Prices

Outstanding


Contractual Life


Exercise Price


Exercisable


Exercise Price$9.35 to $11.50


166,375



3.5 years


$
9.66



166,375


$
9.66$12.06 to $14.61


405,763



5.1 years



12.78



405,763



12.78$16.00 and above


746,150



8.0 years



18.78



206,754



19.45     Options Vested or Expected to VestWeighted



Weighted AverageAverage

Aggregate

RemainingNumber

Exercise Price

Intrinsic Value

Contractual LifeDecember 31, 2009


1,270,126


$
15.68


$
1,727,742


6.5 years   Options ExercisableWeighted





Weighted AverageAverage


Aggregate


RemainingNumber


Exercise Price


Intrinsic Value


Contractual LifeDecember 31, 2009


778,892


$
13.88


$
1,727,742


5.4 years         12.
    Segment
    Information     84




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    Gross Written Premiums% of





% of





% of2009


Total


2008


Total


2007


TotalContract

$
274,848



62.7
%

$
300,236



64.3
%

$
305,624



64.8
%Commercial:License and permit


75,594



17.3



80,291



17.2



78,875



16.7Judicial and fiduciary


22,941



5.2



23,227



5.0



23,348



5.0Public official


25,707



5.9



23,466



5.0



23,584



5.0Other


9,306



2.1



9,015



1.9



9,021



1.9Total commercial


133,548



30.5



135,999



29.1



134,828



28.6Fidelity and other


29,909



6.8



30,892



6.6



31,208



6.6$
438,305



100.0
%

$
467,127



100.0
%

$
471,660



100.0
%Domestic

$
432,260



98.6
%

$
461,998



98.9
%

$
467,285



99.1
%International


6,045



1.4



5,129



1.1



4,375



0.9$
438,305



100.0
%

$
467,127



100.0
%

$
471,660



100.0
%   Net Written Premiums% of





% of





% of2009


Total


2008


Total


2007


TotalContract

$
250,793



61.0
%

$
268,085



62.1
%

$
266,749



62.3
%Commercial


130,332



31.7



132,702



30.7



130,332



30.4Fidelity and other


29,909



7.3



30,892



7.2



31,208



7.3$
411,034



100.0
%

$
431,679



100.0
%

$
428,289



100.0
%Domestic

$
404,989



98.5
%

$
426,570



98.8
%

$
423,914



99.0
%International


6,045



1.5



5,109



1.2



4,375



1.0$
411,034



100.0
%

$
431,679



100.0
%

$
428,289



100.0
%    85




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    13.
    Statutory
    Financial Data (unaudited)      2009


2008Consolidated equity per GAAP

$
923,084


$
767,295Impact of non-insurance companies and eliminations


16,820



18,809Insurance company equity per GAAP


939,904



786,104Intangible assets


(133,361
)


(133,361
)Net unrealized (gain) loss on fixed income securities


(48,669
)


4,991Deferred policy acquisition costs


(99,836
)


(102,092
)Deferred income taxes, net


48,513



30,205Accumulated postretirement benefit obligations


781



(61
)Non-admitted assets


(28,030
)


(31,149
)Total statutory capital and surplus per statutory accounting
    practices

$
679,302


$
554,637   state-by-state
 86




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    14.
    Related
    Party Transactions    and/or
       87




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Selected
    Quarterly Financial Data (unaudited)    First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter2009Revenues

$
113,331


$
118,225


$
123,295


$
118,591Income before income taxes

$
29,047


$
30,974


$
36,378


$
72,809Income tax expense


8,183



8,807



10,854



23,503Net income

$
20,864


$
22,167


$
25,524


$
49,306Basic earnings per common share

$
0.47


$
0.50


$
0.58


$
1.11Diluted earnings per common share

$
0.47


$
0.50


$
0.57


$
1.112008Revenues

$
114,397


$
120,202


$
121,300


$
121,725Income before income taxes

$
32,523


$
34,455


$
50,353


$
41,881Income tax expense


9,621



10,405



16,020



12,763Net income

$
22,902


$
24,050


$
34,333


$
29,118Basic earnings per common share

$
0.52


$
0.54


$
0.78


$
0.66Diluted earnings per common share

$
0.52


$
0.54


$
0.78


$
0.662007Revenues

$
109,283


$
115,620


$
125,010


$
115,784Income before income taxes

$
29,721


$
31,018


$
40,478


$
31,026Income tax expense


8,972



9,124



12,481



9,170Net income

$
20,749


$
21,894


$
27,997


$
21,856Basic earnings per common share

$
0.47


$
0.50


$
0.64


$
0.50Diluted earnings per common share

$
0.47


$
0.50


$
0.63


$
0.49  88




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Rules 13a-15(e) 15d-15(e)
  Form 10-K
  Rules 13a-15(f) 15d-15(f)
  ITEM 9B.
    OTHER
    INFORMATION   PART III.  ITEMS 10,
    11, 12, 13, and 14.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE,
    EXECUTIVE COMPENSATION, SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS, CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE, AND PRINCIPAL ACCOUNTING FEES
    AND SERVICES  Form 10-K.
 89




---



##### 



PART IV.  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES   
 PageFinancial Statement Schedules:Schedule I  Summary of
    Investments


91Schedule II  Condensed Financial
    Information of Registrant


92Schedule III  Supplementary
    Insurance Information


96Schedule IV  Reinsurance


97Schedule V  Valuation and
    Qualifying Accounts


98Schedule VI  Supplemental
    Information Concerning Property  Casualty Insurance
    Operations


99(a)(3) Exhibits


100   90




---



##### Table of Contents



SCHEDULE I  CNA
    SURETY CORPORATION AND SUBSIDIARIES
    SUMMARY OF INVESTMENTS
    OTHER THAN INVESTMENTS IN RELATED PARTIES
    As of December 31, 2009 and 2008
   As of December 31, 2009Cost orAmortized


Fair


CarryingCost


Value


Value(Amounts in thousands)Fixed Income Securities:U.S. Government and government agencies and authorities

$
152,334


$
157,128


$
157,128States, municipalities and political subdivisions


696,505



728,568



728,568All other bonds, including corporate bonds and other
    asset-backed securities


370,431



380,527



380,527Total fixed income securities


1,219,270



1,266,223



1,266,223Equity securities


1,429



1,610



1,610Short-term investments


48,999







48,999Total investments

$
1,269,698






$
1,316,832   As of December 31, 2008Cost orAmortized


Fair


CarryingCost


Value


Value(Amounts in thousands)Fixed Income Securities:U.S. Government and government agencies and authorities

$
177,490


$
184,598


$
184,598States, municipalities and political subdivisions


697,305



696,163



696,163All other bonds, including corporate bonds and other
    asset-backed securities


167,021



153,885



153,885Total fixed income securities


1,041,816



1,034,646



1,034,646Equity securities


1,231



1,231



1,231Short-term investments


80,606







80,606Total investments

$
1,123,653






$
1,116,483  91




---



##### Table of Contents



SCHEDULE II  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)
    BALANCE SHEETS
  December 31,2009


2008(Amounts in thousands)AssetsInvestments in and advances to subsidiaries

$
933,907


$
779,743Equity investments (cost: $1,429 and $1,231)


1,610



1,231Short-term investments, at cost (which approximates fair value)


12,071



8,533Cash


1,894



4,605Other assets


7,220



6,386Total assets

$
956,702


$
800,498LiabilitiesLong-term debt

$
30,930


$
30,892Other liabilities


2,688



2,311Total liabilities


33,618



33,203Stockholders EquityCommon stock


456



455Additional paid-in capital


279,388



276,255Retained earnings


627,505



509,644Accumulated other comprehensive income (loss)


30,406



(4,286
)Treasury stock, at cost


(14,671
)


(14,773
)Total stockholders equity


923,084



767,295Total liabilities and stockholders equity

$
956,702


$
800,498    92




---



##### Table of Contents



SCHEDULE II
  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)   (Continued)
    STATEMENTS OF INCOME
  Years Ended December 31,2009


2008


2007(Amounts in thousands)Revenues:Net investment income

$
121


$
347


$
677Net realized investment (losses) gains:Other-than-temporary
    impairment losses










Portion of
    other-than-temporary
    impairment losses recognized in other comprehensive income
    (before taxes)










Net impairment losses recognized in earnings










Net realized investment gains (losses) gains, excluding
    impairment losses on
    available-for-sale
    securities


(40
)


(376
)


146Total net realized investment (losses) gains


(40
)


(376
)


146Total revenues


81



(29
)


823Expenses:Interest expense


1,391



2,148



2,918Corporate expense


8,581



6,968



7,193Total expenses


9,972



9,116



10,111Loss from operations before income taxes and equity in net
    income of subsidiaries


(9,891
)


(9,145
)


(9,288
)Income tax benefit


(3,515
)


(3,161
)


(3,367
)Net loss before equity in net income of subsidiaries


(6,376
)


(5,984
)


(5,921
)Equity in net income of subsidiaries


124,237



116,387



98,417Net income

$
117,861


$
110,403


$
92,496    93




---



##### Table of Contents



SCHEDULE II
  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)   (Continued)
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2009


2008


2007(Amounts in thousands)Operating Activities:Net income

$
117,861


$
110,403


$
92,496Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:Equity in net income of subsidiaries


(124,237
)


(116,387
)


(98,417
)Depreciation and amortization


38



101



101Net realized investment losses (gains)


40



376



(146
)Stock-based compensation


1,990



1,693



1,892Cash dividends from subsidiaries


5,000



3,000



2,000Tax payments received from subsidiaries


41,273



48,570



43,385Federal income tax payments


(38,718
)


(45,248
)


(41,000
)Deferred income tax benefit


(752
)


(490
)


(483
)Changes in:Accrued expenses


409



(701
)


(747
)Change in other assets and liabilities


(2,840
)


(2,048
)


(3,380
)Net cash provided by (used in) provided by operating activities


64



(731
)


(4,299
)Investing Activities:Net advances (to) from subsidiaries


(246
)


1,152



232Proceeds from sales of fixed income securities










200Purchases of equity securities


(868
)


(550
)


(873
)Proceeds from sales of equity securities


631



626



844Changes in short-term investments


(3,538
)


(1,239
)


2,158Net cash (used in) provided by investing activities


(4,021
)


(11
)


2,561Financing Activities:Employee stock option exercises and other


1,246



580



3,608Net cash provided by financing activities


1,246



580



3,608(Decrease) increase in cash


(2,711
)


(162
)


1,870Cash at beginning of period


4,605



4,767



2,897Cash at end of period

$
1,894


$
4,605


$
4,767    94




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##### Table of Contents



SCHEDULE II
  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)   (Continued)
 NOTES TO
    CONDENSED FINANCIAL INFORMATION
  1.
    Basis of
    Presentation  Form 10-K.
  2.
    Cash and
    Short-Term Investments    3.
    Debt  30-year
            4.
    Commitments
    and Contingencies   95




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##### Table of Contents



SCHEDULE III
  CNA
    SURETY CORPORATION AND SUBSIDIARIESSUPPLEMENTARY INSURANCE INFORMATION
    As of and for the Years Ended
    December 31, 2009, 2008 and 2007
   Years Ended December 31,2009


2008


2007(Amounts in thousands)Deferred policy acquisition costs

$
99,836


$
102,092Unpaid loss and loss adjustment expense reserves

$
406,123


$
428,724Unearned premiums

$
247,776


$
258,824Net premium revenue

$
421,872


$
431,696


$
421,506Net investment income

$
50,371


$
47,302


$
44,636Benefits, claims, losses and settlement expenses

$
69,416


$
80,844


$
103,124Amortization of deferred policy acquisition costs

$
168,690


$
173,305


$
170,346Other operating expenses

$
64,737


$
62,115


$
57,066Net premiums written

$
411,034


$
431,679


$
428,289  96




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##### Table of Contents



SCHEDULE IV
  CNA
    SURETY CORPORATION AND SUBSIDIARIES
  REINSURANCE
 For the
    Years Ended December 31, 2009, 2008 and 2007
   PercentageCeded to


Assumed





of AmountGross


Other


from Other


Net


AssumedAmount


Companies


Companies(1)


Amount


to Net(Amounts in thousands)Year Ended December 31, 2009Premiums written:Property and casualty insurance

$
347,646


$
27,271


$
90,659


$
411,034



22.1
%Total premiums written

$
347,646


$
27,271


$
90,659


$
411,034



22.1
%Premiums earned:Property and casualty insurance

$
351,519


$
27,480


$
97,833


$
421,872



23.2
%Total premiums earned

$
351,519


$
27,480


$
97,833


$
421,872



23.2
%Year Ended December 31, 2008Premiums written:Property and casualty insurance

$
358,625


$
35,448


$
108,502


$
431,679



25.1
%Total premiums written

$
358,625


$
35,448


$
108,502


$
431,679



25.1
%Premiums earned:Property and casualty insurance

$
357,771


$
35,538


$
109,463


$
431,696



25.4
%Total premiums earned

$
357,771


$
35,538


$
109,463


$
431,696



25.4
%Year Ended December 31, 2007Premiums written:Property and casualty insurance

$
360,877


$
43,371


$
110,783


$
428,289



25.9
%Total premiums written

$
360,877


$
43,371


$
110,783


$
428,289



25.9
%Premiums earned:Property and casualty insurance

$
353,594


$
45,026


$
112,938


$
421,506



26.8
%Total premiums earned

$
353,594


$
45,026


$
112,938


$
421,506



26.8
%     (1)

    
    Primarily from affiliates. 97




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##### Table of Contents



SCHEDULE V
  CNA
    SURETY CORPORATION AND SUBSIDIARIES
  VALUATION
    AND QUALIFYING ACCOUNTS
 As of and
    for the Years Ended December 31, 2009, 2008 and
    2007
   AdditionsBalance at


Charged to


Charged to





Balance atBeginning


Costs and


Other





End ofof Period


Expenses


Accounts


Deductions(1)


Period(Amounts in thousands)Year Ended December 31, 2009Allowance for doubtful accounts on premiums receivable

$
1,307


$
564


$



$
761


$
1,110Allowance for doubtful accounts on reinsurance receivable

$



$



$



$



$
Year Ended December 31, 2008Allowance for doubtful accounts on premiums receivable

$
1,145


$
443


$



$
281


$
1,307Allowance for doubtful accounts on reinsurance receivable

$



$



$



$



$
Year Ended December 31, 2007Allowance for doubtful accounts on premiums receivable

$
1,369


$
393


$



$
617


$
1,145Allowance for doubtful accounts on reinsurance receivable

$



$



$



$



$
     (1)

    
    Write-offs charged against allowance. 98




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##### Table of Contents



SCHEDULE VI
  CNA
    SURETY CORPORATION AND SUBSIDIARIESSUPPLEMENTAL INFORMATION CONCERNING
    PROPERTY-CASUALTY
    INSURANCE OPERATIONS
    As of and for the Years Ended December 31, 2009, 2008 and
    2007
   Years Ended December 31,2009


2008


2007(Amounts in thousands)Deferred policy acquisition costs

$
99,836


$
102,092Reserves for unpaid claims and claim adjustment expenses

$
406,123


$
428,724Discount (if any) deducted

$



$
Unearned premiums

$
247,776


$
258,824Net premium revenue

$
421,872


$
431,696


$
421,506Net investment income

$
50,371


$
47,302


$
44,636Net claims and claim expenses incurred related to:Current year

$
123,698


$
126,345


$
108,178Prior years

$
(54,282
)

$
(45,501
)

$
(5,054
)Amortization of deferred policy acquisition costs

$
168,690


$
173,305


$
170,346Net paid claims and claim adjustment expenses

$
59,294


$
58,157


$
70,144Net premiums written

$
411,034


$
431,679


$
428,289  99




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##### Table of Contents



(a)(3)
    Exhibits  ExhibitNumber

Description9


Not applicable.10
(1)

Form of The CNA Surety Corporation Replacement Stock Option Plan
    (filed on August 15, 1997 as Exhibit 10(12) to CNA
    Surety Corporations Registration Statement on
    Form S-4
    (Registration
    No. 333-33753),
    and incorporated herein by reference).10
(2)

Form of CNA Surety Corporation 1997 Long-Term Equity
    Compensation Plan (filed on August 15, 1997 as
    Exhibit 10(13) to CNA Surety Corporations
    Registration Statement on
    Form S-4
    (Registration
    No. 333-33753),
    and incorporated herein by reference).10
(3)

Form of Aggregate Stop Loss Reinsurance Contract by and between
    Western Surety Company, Universal Surety of America, Surety
    Bonding Company of America and Continental Casualty Company
    (filed on December 27, 1996 as Exhibit 2 to Capsure
    Holdings Corp.s
    Form 8-K,
    and incorporated herein by reference).10
(13)

Form of Surety Excess of Loss Reinsurance Contract by and
    between Western Surety Company, Universal Surety of America,
    Surety Bonding Company of America and Continental Casualty
    Company (filed on March 15, 2004 as Exhibit 10(13) to
    CNA Surety Corporations
    Form 10-K,
    and incorporated herein by reference).10
(15)

Credit Agreement between CNA Surety Corporation and LaSalle Bank
    National Association (filed on November 14, 2002 as
    Exhibit 10(3) to CNA Surety Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(16)

Amendment to Credit Agreement between CNA Surety Corporation and
    LaSalle Bank National Association (filed on March 26, 2003
    as Exhibit 10(9) to CNA Surety Corporations
    Form 10-K,
    and incorporated herein by reference).10
(17)

Second Amendment to Credit Agreement between CNA Surety
    Corporation and LaSalle Bank National Association (filed on
    November 13, 2003 as Exhibit 10(2) to CNA Surety
    Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(18)

Third Amendment to Credit Agreement between CNA Surety
    Corporation and LaSalle Bank National Association (filed on
    November 13, 2003 as Exhibit 10(2) to CNA Surety
    Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(19)

Form of Services and Indemnity Agreement by and between Western
    Surety Company and Continental Casualty Company (filed on
    November 14, 2002 as Exhibit 10(5) to CNA Surety
    Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(23)

Form of CNA Surety Corporation 2000 Employee Stock Purchase Plan
    (filed on January 26, 2001 (incorporated by reference) to
    CNA Surety Corporations Registration Statement on
    Form S-8
    (Registration
    No. 333-54440),
    and incorporated herein by reference).10
(27)

Form of CNA Surety Corporation 2005 Deferred Compensation Plan
    (filed on May 2, 2005 as Exhibit 10(27) to CNA Surety
    Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(28)

Form of CNA Surety Corporation 2005 Deferred Compensation Plan
    Trust (filed on May 2, 2005 as Exhibit 10(28) to CNA
    Surety Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(29)

Form of Third Amendment to CNA Surety Corporation 2005 Deferred
    Compensation Plan (filed on May 2, 2005 as
    Exhibit 10(29) to CNA Surety Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(30)

Form of Employment Agreement dated as of January 1, 2006 by
    and between CNA Surety Corporation and John F. Welch (filed on
    December 14, 2005 as Exhibit 10(30) to CNA Surety
    Corporations
    Form 8-K,
    and incorporated herein by reference).10
(32)

Amendment to Form of Surety Excess of Loss Reinsurance Contract
    by and between Western Surety Company, Universal Surety of
    America, Surety Bonding Company of America and Continental
    Casualty Company (filed on August 2, 2005 as
    Exhibit 10(31) to CNA Surety Corporations
    Form 10-Q,
    and incorporated herein by reference). 100




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##### Table of Contents



ExhibitNumber

Description10
(33)

Amendment to Form of Surety Quota Share Reinsurance Contract by
    and between Western Surety Company and Continental Casualty
    Company (filed on August 2, 2005 as Exhibit 10(32) to
    CNA Surety Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(34)

Form of CNA Surety Corporation 2006 Long-Term Equity
    Compensation Plan (filed on February 16, 2006 as
    Exhibit 10(34) to CNA Surety Corporations
    Form 8-K,
    and incorporated herein by reference).10
(35)

Refinancing of Credit Agreement between CNA Surety Corporation
    and LaSalle Bank National Association (filed on July 28,
    2005 as CNA Surety Corporations
    Form 8-K,
    and incorporated herein by reference).10
(36)

CNA Surety Corporation 2006 Long-Term Equity Compensation Plan
    (filed on December 21, 2006 as Exhibit 10(36) to CNA
    Surety Corporations Registration Statement on
    Form S-8
    (Registration
    No. 333-139551),
    and incorporated herein by reference).10
(37)

Post-Effective Amendment to CNA Surety Corporation 1997
    Long-Term Equity Compensation Plan (filed on December 21,
    2006 as Exhibit 10(37) to CNA Surety Corporations
    Registration Statement on
    Form S-8
    POS (Registration
    No. 333-37207),
    and incorporated herein by reference).10
(38)

Form of Surety Quota Share Reinsurance Contract by and between
    Western Surety Company and Continental Casualty Company (filed
    on February 19, 2008 as Exhibit 10(38) to CNA Surety
    Corporations
    Form 10-K
    and incorporated herein by reference).10
(39)

Form of Employment Agreement dated as of January 1, 2009 by
    and between CNA Surety Corporation and John F. Welch (filed on
    October 28, 2008 as Exhibit 10(39) to CNA Surety
    Corporations
    Form 8-K,
    and incorporated herein by reference).10
(40)

Form of Commutation and Release Agreement as respects certain
    business under the Surety Quota Share Reinsurance Contract by
    and between Western Surety Company and Continental Casualty
    Company (filed on February 19, 2008 as Exhibit 10(38)
    to CNA Surety Corporations
    Form 10-K,
    and incorporated herein by reference).10
(41)

Form of Termination Addendum to Surety Excess of Loss
    Reinsurance Contract by and between Western Surety Company,
    Universal Surety of America and Surety Bonding Company of
    America and Continental Casualty Company (filed on March 1,
    2005 as Exhibit 10(13) to CNA Surety Corporations
    Form 10-K,
    and incorporated herein by reference).10
(42)

Form of Addendum No. 1 to the Services and Indemnity
    Agreement by and between Western Surety Company and Continental
    Casualty Company (filed on November 14, 2002 as
    Exhibit 10(5) to CNA Surety Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(43)

Form of Administrative Services Agreement by and between Western
    Surety Company and Continental Casualty Company (filed on
    July 31, 2009 as Exhibit 10(43) to CNA Surety
    Corporations Form 10-Q, and incorporated herein by
    reference).10
(44)

Form of First Amendment to the Employment Agreement with CNA
    Surety Corporation and John F. Corcoran, Senior Vice President
    and Chief Financial Officer (filed on February 8, 2010 as
    Exhibit 10(44) to CNA Surety Corporations
    Form 8-K,
    and incorporated herein by reference).10
(45)

Form of First Amendment to the Employment Agreement with CNA
    Surety Corporation and Douglas W. Hinkle, Senior Vice President
    and Chief Underwriting Officer (filed on February 8, 2010
    as Exhibit 10(45) to CNA Surety Corporations
    Form 8-K,
    and incorporated herein by reference).10
(46)

Form of Surety Quota Share Reinsurance Contract by and between
    Western Surety Company and Continental Casualty Company.10
(47)

Form of Canadian Services and Indemnity Agreement by and between
    Western Surety Company and Continental Casualty Company.10
(48)

Form of Surety Canada Quota Share Treaty by and between Western
    Surety Company and Continental Casualty Company.11


Not Applicable.12


Not Applicable.13


Not Applicable. 101




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##### Table of Contents



ExhibitNumber

Description16


Not Applicable.18


Not Applicable.21


Subsidiaries of the Registrant.22


Not Applicable.23


Consent of Deloitte & Touche LLP dated
    February 19, 2010.24


Not Applicable.31
(1)

Certification pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002-Chief
    Executive Officer.31
(2)

Certification pursuant to
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002-Chief
    Financial Officer.32
(1)

Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32
(2)

Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.  102




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##### Table of Contents



SIGNATURES
      /s/  John
    F. Welch        John
    F. Corcoran
           Date

Title

SignatureFebruary 19, 2010

Chairman of the Board
    and Director

/s/  David
    B. EdelsonDavid
    B. EdelsonFebruary 19, 2010

Director

/s/  Philip
    H. BrittPhilip
    H. BrittFebruary 19, 2010

Director

/s/  Anthony
    S. ClebergAnthony
    S. ClebergFebruary 19, 2010

Director

/s/  D.
    Craig MenseD.
    Craig MenseFebruary 19, 2010

Director

/s/  Robert
    A. TinstmanRobert
    A. TinstmanFebruary 19, 2010

Director

/s/  John
    F. WelchJohn
    F. WelchFebruary 19, 2010

Director

/s/  Peter
    W. WilsonPeter
    W. Wilson  103