##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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,
    2010o

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
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:




---



##### 





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

Business


2General


2Formation of CNA Surety and Merger


2CNAF Proposal


2Description of Business


2Financial Strength Ratings


3Product Information


3Marketing


5Underwriting


7Competition


7Reinsurance


7Reserves for Unpaid Losses and Loss
    Adjustment Expenses


8Claims


10Environmental Claims


10Regulation


10Investments


11Employees


12Availability of Securities and
    Exchange Commission Reports


12Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff Comments


14Item 2.

Properties


15Item 3.

Legal Proceedings


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 Disclosures About
    Market Risk


46Item 8.

Financial Statements and Supplementary Data


48Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


90Item 9A.

Controls and Procedures


90Item 9B.

Other Information


90PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


90Item 11.

Executive Compensation


90Item 12.

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


90Item 13.

Certain Relationships and Related Transactions
    and Director Independence


90Item 14.

Principal Accounting Fees and Services


90PART IVItem 15.

Exhibits, Financial Statement Schedules


91EX-10.51EX-10.52EX-10.53EX-10.54EX-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   CNAF
    Proposal     Description
    of Business   2




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##### Table of Contents



Financial
    Strength Ratings  A.M. Best
    Company, Inc.
      Standard
    and Poors
   Product
    Information    Products
    and Policies
    and/or
    Bid bonds:
  Performance bonds:
 3




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##### Table of Contents



Payment bonds:
      License and Permit bonds:
  Judicial and Fiduciary bonds:
  Public Official bonds:
          Gross Written Premiums% of





% of





% of2010


Total


2009


Total


2008


TotalContract

$
278,375



63.2
%

$
274,848



62.7
%

$
300,236



64.3
%Commercial:License and permit


75,133



17.1



75,594



17.3



80,291



17.2Judicial and fiduciary


22,250



5.1



22,941



5.2



23,227



5.0Public official


25,111



5.7



25,707



5.9



23,466



5.0Other


8,822



2.0



9,306



2.1



9,015



1.9Total commercial


131,316



29.9



133,548



30.5



135,999



29.1Fidelity and other


30,463



6.9



29,909



6.8



30,892



6.6$
440,154



100.0
%

$
438,305



100.0
%

$
467,127



100.0
%Domestic

$
430,901



97.9
%

$
432,260



98.6
%

$
461,998



98.9
%International


9,253



2.1



6,045



1.4



5,129



1.1$
440,154



100.0
%

$
438,305



100.0
%

$
467,127



100.0
%   4




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##### Table of Contents



Net Written Premiums% of





% of





% of2010


Total


2009


Total


2008


TotalContract

$
257,410



61.8
%

$
250,793



61.0
%

$
268,085



62.1
%Commercial


128,401



30.9



130,332



31.7



132,702



30.7Fidelity and other


30,463



7.3



29,909



7.3



30,892



7.2$
416,274



100.0
%

$
411,034



100.0
%

$
431,679



100.0
%Domestic

$
407,021



97.8
%

$
404,989



98.5
%

$
426,570



98.8
%International


9,253



2.2



6,045



1.5



5,109



1.2$
416,274



100.0
%

$
411,034



100.0
%

$
431,679



100.0
%   Domestic Bonds/Policies in Force as of December 31,% of





% of





% of2010


Total


2009


Total


2008


TotalContract


26



1.2
%


29



1.3
%


31



1.3
%Commercial


1,650



76.0



1,711



75.8



1,836



76.4Fidelity and other


495



22.8



517



22.9



537



22.32,171



100.0
%


2,257



100.0
%


2,404



100.0
%     Average Bond Penalty/Policy Limit as ofDecember 31,2010


2009


2008Contract

$
1,286.4


$
1,150.0


$
1,236.7Commercial


14.9



14.8



14.5Fidelity and other


19.7



19.8



19.9    Marketing   5




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##### Table of Contents



Years Ended December 31,2010


2009


2008Gross Written Premiums by State:California


8.9
%


8.4
%


9.2
%Texas


8.6



9.4



9.4New York


5.0



4.9



5.0Florida


4.9



5.7



6.0Illinois


4.2



4.5



4.5Massachusetts


3.6



3.3



3.1Pennsylvania


3.2



3.1



2.8Georgia


2.9



2.7



3.4Colorado


2.5



2.3



2.7Minnesota


2.4



1.8



2.2All
    other(a)


53.8



53.9



51.7Total


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, 2010.  Contract
    Surety
    Commercial
    Surety
    one-day
   6




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##### Table of Contents



Underwriting     Competition     Reinsurance     7




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##### Table of Contents



Reserves
    for Unpaid Losses and Loss Adjustment Expenses          Net reserves at end of year, GAAP basis

$
346,082Ceded reinsurance, net of indemnification


43,007Gross reserves at end of year, GAAP basis


389,089Estimated reinsurance recoverable netted against gross reserves
    for SAP


(43,007
)Net reserves on retroactive reinsurance assumed


(10,223
)Net reserves at end of year, SAP basis

$
335,859    8




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##### Table of Contents



re-estimates non-U.S. currencies,
  As of December 31,2000


2001


2002


2003


2004


2005


2006


2007


2008


2009


2010(Dollars in thousands)Gross reserves for losses and loss adjustment expenses

$
204,457


$
315,811


$
303,433


$
413,539


$
363,387


$
424,449


$
434,224


$
472,842


$
428,724


$
406,123


$
389,089Originally reported ceded recoverable


70,159



166,318



137,301



158,357



116,831



147,435



144,858



150,496



83,691



50,968



43,007Net reserves for losses and loss adjustment expenses


134,298



149,493



166,132



255,182



246,556



277,014



289,366



322,346



345,033



355,155



346,082Net paid (cumulative) as of:One year later


44,763



64,832



59,567



88,857



65,353



76,623



55,879



46,203



43,723



38,183



Two years later


75,825



98,885



100,595



128,607



92,582



120,462



81,802



70,941



69,129







Three years later


87,011



117,396



115,034



145,895



114,984



133,942



95,857



87,727











Four years later


93,154



132,891



125,740



158,257



124,742



145,133



107,901















Five years later


99,117



139,051



133,696



161,978



134,324



154,737



















Six years later


100,628



139,125



136,669



171,446



143,127























Seven years later


98,737



145,058



143,254



179,455



























Eight years later


102,953



147,770



149,139































Nine years later


104,865



150,802



































Ten years later


104,969







































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


134,298



149,493



166,132



255,182



246,556



277,014



289,366



322,346



345,033



355,155



346,082One year later


139,110



155,673



205,422



254,570



223,223



271,704



284,312



276,845



290,751



278,936



Two years later


140,094



182,812



199,865



231,619



224,919



264,794



230,205



222,562



214,463







Three years later


132,504



169,340



195,191



246,244



218,301



232,115



202,172



187,263











Four years later


120,051



174,346



203,488



237,544



202,416



214,685



190,707















Five years later


119,471



174,847



196,258



225,537



193,888



223,881



















Six years later


118,485



167,741



191,609



225,511



201,945























Seven years later


118,834



164,813



190,495



233,453



























Eight years later


116,344



164,343



195,884































Nine years later


117,661



168,769



































Ten years later


118,227







































Total net redundancy (deficiency)

$
16,071


$
(19,276)


$
(29,752)


$
21,729


$
44,611


$
53,133


$
98,659


$
135,083


$
130,570


$
76,219


$
Net redundancy (deficiency) due to foreign exchange






































(110)



Cumulative net redundancy (deficiency) excluding foreign exchange

$
16,071


$
(19,276)


$
(29,752)


$
21,729


$
44,611


$
53,133


$
98,659


$
135,083


$
130,570


$
76,329


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


12.0%



(12.9)%



(17.9)%



8.5%



18.1%



19.2%



34.1%



41.9%



37.8%



21.5%



%  9




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##### Table of Contents



As of December 31,2000


2001


2002


2003


2004


2005


2006


2007


2008


2009Net reserves re-estimated

$
118,227


$
168,769


$
195,884


$
233,453


$
201,945


$
223,881


$
190,707


$
187,263


$
214,463


$
278,936Re-estimated ceded recoverable


114,937



127,474



147,058



96,154



93,055



137,922



138,911



144,707



68,077



34,822Gross reserves re-estimated

$
233,164


$
296,243


$
342,942


$
329,607


$
295,000


$
361,803


$
329,618


$
331,970


$
282,540


$
313,758Total gross (deficiency) redundancy

$
(28,707
)

$
19,568


$
(39,509)


$
83,932


$
68,387


$
62,646


$
104,606


$
140,872


$
146,184


$
92,365Total gross (deficiency) redundancy due to foreign exchange)






































(110)Total gross (deficiency) redundancy excluding foreign exchange

$
(28,707
)

$
19,568


$
(39,509)


$
83,932


$
68,387


$
62,646


$
104,606


$
140,872


$
146,184


$
92,475  Claims   Environmental
    Claims   Regulation       10




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##### Table of Contents



Investments       11




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##### Table of Contents



Employees   Availability
    of SEC Reports  Form 10-K, Form 10-Q, Form 8-K 1-800-SEC-0330.
  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.
   12




---



##### Table of Contents



We have a
    significant concentration of exposure to construction
    firms.
    Our
    premium writings and profitability are impacted by the
    availability and cost of reinsurance and our reinsurance
    purchasing decisions.
      We may
    not be able to collect amounts owed to us by
    reinsurers.
    We rely
    upon affiliated companies that we do not control to conduct
    certain aspects of our business.
    Rating
    agencies may downgrade their ratings for us or for affiliated
    companies that we rely on to write business. This would
    adversely affect our ability to write business.
    We face
    intense competition.
   13




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##### Table of Contents



Demand
    for our products is created by laws that could be
    changed.
    We are
    subject to capital adequacy requirements and, if we do not meet
    these requirements, regulatory agencies may restrict or prohibit
    us from operating our business.
    Our
    insurance subsidiaries, upon whom we depend for dividends and
    advances in order to fund our working capital needs, are limited
    by state regulators in their ability to pay dividends.
    Some of
    the credit 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   14




---



##### Table of Contents



ITEM 2.
    PROPERTIES        ITEM 3.
    LEGAL
    PROCEEDINGS   PART II.  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    High


Low20104th Quarter

$
24.00


$
17.243rd Quarter

$
18.00


$
15.482nd Quarter

$
18.09


$
15.451st Quarter

$
18.12


$
13.8020094th Quarter

$
17.10


$
13.243rd Quarter

$
17.91


$
12.802nd Quarter

$
19.81


$
13.031st Quarter

$
19.80


$
11.58  15




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##### Table of Contents



Indexed ReturnsYears Ended December 31,Company/Index

2005


2006


2007


2008


2009


2010CNA Surety Corporation


100



147.56



135.83



131.78



102.20



162.53Standard & Poors 500 Stock Index


100



113.62



117.63



72.36



89.33



100.75Standard & Poors Property & Casualty
    Index


100



110.72



93.32



63.99



69.90



75.26   
      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


1,093,181


$
15.67



2,009,145   Dividends
   16




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    2010


2009


2008


2007


2006(Dollars in thousands, except per share data)Total revenues

$
472,693


$
473,442


$
477,624


$
465,697


$
431,693Gross written premiums

$
440,154


$
438,305


$
467,127


$
471,660


$
451,356Net written premiums

$
416,274


$
411,034


$
431,679


$
428,289


$
409,629Net earned premium

$
418,017


$
421,872


$
431,696


$
421,506


$
393,642Net losses and loss adjustment
    expenses(a)


45,235



69,416



80,844



103,124



95,830Net commissions, brokerage and other underwriting expenses


227,732



233,427



235,420



227,412



216,560Net investment income


53,591



50,371



47,302



44,636



39,324Net realized investment gains (losses)


1,085



1,199



(1,374
)


(445
)


(1,273
)Interest expense


1,164



1,391



2,148



2,918



3,669Other
    expense(b)


1,474















Income before income taxes


197,088



169,208



159,212



132,243



115,634Income tax expense


62,668



51,347



48,809



39,747



32,816Net income

$
134,420


$
117,861


$
110,403


$
92,496


$
82,818Basic earnings per common share

$
3.03


$
2.66


$
2.50


$
2.10


$
1.90Diluted earnings per common share

$
3.02


$
2.65


$
2.49


$
2.09


$
1.89Loss
    ratio(a)


10.8
%


16.5
%


18.7
%


24.5
%


24.3
%Expense
    ratio(b)


54.5



55.3



54.5



54.0



55.0Combined
    ratio(a)(b)


65.3
%


71.8
%


73.2
%


78.5
%


79.3
%Invested assets and cash

$
1,466,693


$
1,322,654


$
1,126,079


$
1,024,826


$
897,285Goodwill and other intangible assets, net of accumulated
    amortization


138,785



138,785



138,785



138,785



138,785Total assets


1,837,734



1,709,035



1,565,519



1,507,654



1,368,333Insurance reserves


635,075



653,899



687,548



731,772



688,027Debt


30,930



30,930



30,892



30,791



30,690Total liabilities


769,001



785,951



798,224



839,949



802,431Stockholders equity


1,068,733



923,084



767,295



667,705



565,902Book value per share

$
23.88


$
20.85


$
17.37


$
15.13


$
12.90     (a)

    
    Includes the effect of re-estimates of prior year reserves,
    known as reserve development. The dollar amount of these reserve
    reductions were $76.3 million, $54.3 million,
    $45.5 million, $5.1 million and $5.3 million for
    the years ended December 31, 2010, 2009, 2008, 2007 and
    2006, respectively. The percentage point effect of these reserve
    reductions on the loss and combined ratios for these years were
    18.3, 12.8, 10.6, 1.2 and 1.4 percentage points,
    respectively.(b)

    
    Includes expenses of $1.5 million incurred related to the
    evaluation of the CNAF Proposal. These expenses are shown as
    Other expense in the Consolidated Statements of
    Income and are not included in the expense or combined ratios. 17




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K.
  CNAF
    Proposal
      Critical
    Accounting Policies
    Reserves
    for Unpaid Losses and Loss Adjustment Expenses and
    Reinsurance
       18




---



##### 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

$
78,737


$
178,153


$
256,890Commercial


49,498



71,737



121,235Fidelity and other


3,586



7,378



10,964Total

$
131,821


$
257,268


$
389,089         
    Historical development method, sometimes referred to as a link
    ratio method;
    Bornhuetter-Ferguson method on both a paid and incurred basis;
    Frequency-severity method; and
    Loss ratio method.    Historical
    Development Method
   19




---



##### Table of Contents



Bornhuetter-Ferguson
    Method
  and/or
    Frequency-Severity
    Method
    Loss
    Ratio Method
        sub-lines sub-line, sub-lines
 20




---



##### Table of Contents




    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 31,2010


2009Gross basis:Recorded loss reserves

$
389,089


$
406,123Actuarial point estimate


383,017



383,378Difference

$
6,072


$
22,745Difference as a % of actuarial point estimate


1.6
%


5.9
%Net basis:Recorded loss reserves

$
346,082


$
355,155Actuarial point estimate


340,580



323,575Difference

$
5,502


$
31,580Difference as a % of actuarial point estimate


1.6
%


9.8
%      21




---



##### Table of Contents



and/or
    sub-lines sub-lines
  and/or and/or
    Investments
  available-for-sale.
 22




---



##### Table of Contents



first-in,
  other-than-temporarily other-than-temporarily
        Goodwill
    and Other Intangible Assets
     23




---



##### Table of Contents



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




---



##### Table of Contents



Comparison
    of CNA Surety Actual Results for the Years Ended
    December 31, 2010, 2009 and 2008
  Analysis
    of Net Income
      Results
    of Insurance Operations
    Years Ended December 31,2010


2009


2008Gross written premium

$
440,154


$
438,305


$
467,127Net written premium

$
416,274


$
411,034


$
431,679Net earned premium

$
418,017


$
421,872


$
431,696Net losses and loss adjustment expenses

$
45,235


$
69,416


$
80,844Net commissions, brokerage and other underwriting expenses

$
227,732


$
233,427


$
235,420Loss ratio


10.8
%


16.5
%


18.7
%Expense ratio


54.5



55.3



54.5Combined ratio


65.3
%


71.8
%


73.2
%   Premiums
    Written/Earned
  and/or
 25




---



##### Table of Contents



sub-line
  Years Ended December 31,2010


2009


2008Contract

$
278,375


$
274,848


$
300,236Commercial


131,316



133,548



135,999Fidelity and other


30,463



29,909



30,892$
440,154


$
438,305


$
467,127          26




---



##### Table of Contents



sub-line
  Years Ended December 31,2010


2009


2008Contract

$
257,410


$
250,793


$
268,085Commercial


128,401



130,332



132,702Fidelity and other


30,463



29,909



30,892$
416,274


$
411,034


$
431,679   sub-line
  Years Ended December 31,2010


2009


2008Contract

$
256,696


$
259,324


$
266,551Commercial


131,001



131,923



133,699Fidelity and other


30,320



30,625



31,446$
418,017


$
421,872


$
431,696       Net Loss
    Ratio
       27




---



##### Table of Contents



Expense
    Ratio
      Other
    Expense
    Investment
    Income and Realized Investment Gains/Losses
   28




---



##### Table of Contents



Years Ended December 31,2010


2009


2008Net realized investment gains (losses):Fixed income securities:Gross realized investment gains

$
1,225


$
1,731


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


(122
)


(116
)


(978
)Realized losses from sales


(56
)


(393
)


(19
)Total gross realized investment losses


(178
)


(509
)


(997
)Net realized investment gains (losses) on fixed income securities


1,047



1,222



(997
)Equity securities:Gross realized investment gains


38



44



13Gross realized investment losses:Other-than-temporary
    impairment losses






(46
)


(343
)Realized losses from sales






(20
)


(46
)Total gross realized investment losses






(66
)


(389
)Net realized investment gains (losses) on equity securities


38



(22
)


(376
)Other






(1
)


(1
)Net realized investment gains (losses)

$
1,085


$
1,199


$
(1,374
)     Interest
    Expense
    Income
    Taxes
    Exposure
    Management
   29




---



##### Table of Contents



Excess of
    Loss Reinsurance
      2009
    Third Party Reinsurance
    2010
    Third Party Reinsurance
    2011
    Third Party Reinsurance
   30




---



##### Table of Contents



Related
    Party Reinsurance
           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, 2010

2011


2012


2013


2014


2015


Thereafter


Total(In millions)Debt(a)

$
1.1


$
1.1


$
1.1


$
1.1


$
1.1


$
51.9


$
57.4Operating leases


2.0



1.1



0.2



0.2



0.2







3.7Loss and loss adjustment expense reserves


104.3



96.1



64.2



40.5



26.0



58.0



389.1Other long-term
    liabilities(b)


1.8



1.4



0.9



0.4



0.5



11.4



16.4Total

$
109.2


$
99.7


$
66.4


$
42.2


$
27.8


$
121.3


$
466.6     (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 31,2010





2009Estimated


% 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

$
18,202



1.3
%

$
18,348



1.4
%U.S. Agencies


6,768



0.5



10,131



0.8Collateralized mortgage obligations  residential


22,327



1.6



32,092



2.5Mortgage pass-through securities  residential


72,047



5.1



96,557



7.6Obligations of states and political subdivisions


770,608



54.8



728,568



57.5Corporate bonds


476,873



33.9



344,109



27.1Collateralized mortgage obligations  commercial


10,585



0.8



9,673



0.8Other asset-backed securities:Second mortgages/home equity loans  residential


3,522



0.3



4,761



0.4Consumer credit receivables


10,156



0.7



11,583



0.9Other


13,287



0.9



10,401



0.9Total fixed income securities


1,404,375



99.9
%


1,266,223



99.9
%Equity securities


1,916



0.1



1,610



0.1Total

$
1,406,291



100.0
%

$
1,267,833



100.0
%    36




---



##### Table of Contents



Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated


UnrealizedDecember 31, 2010

or Cost


Gains


12 Months


12 Months


Fair Value


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

$
17,288


$
914


$



$



$
18,202


$
U.S. Agencies


6,518



250











6,768



Collateralized mortgage obligations  residential


20,769



1,558











22,327



Mortgage pass-through securities  residential


68,727



3,320











72,047



Obligations of states and political subdivisions


746,514



30,932



(5,096
)


(1,742
)


770,608



Corporate bonds


456,963



21,164



(1,249
)


(5
)


476,873



Collateralized mortgage obligations - commercial


10,018



567











10,585



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


3,878







(84
)


(272
)


3,522



(927
)(a)Consumer credit receivables


9,998



158











10,156



Other


12,674



617



(4
)






13,287



Total fixed income securities


1,353,347



59,480



(6,433
)


(2,019
)


1,404,375


$
(927
)Equity securities


1,687



229











1,916Total

$
1,355,034


$
59,709


$
(6,433
)

$
(2,019
)

$
1,406,291     (a)

    
    The unrealized loss position of this security was
    $0.3 million at December 31, 2010. 37




---



##### Table of Contents



Gross


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated Fair


UnrealizedDecember 31, 2009

or Cost


Gains


12 Months


12 Months


Value


OTTI LossesFixed 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
)(a)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 was
    $0.5 million at December 31, 2009.  Form 10-K.
    2010


2009Credit
    Rating(a)

Fair Value


% of Total


Fair Value


% of TotalAAA

$
377,757



26.9
%

$
475,870



37.6
%AA


597,065



42.5



476,641



37.6A


360,128



25.7



277,528



21.9BBB


31,439



2.2



14,757



1.2Non-investment grade


37,986



2.7



21,427



1.7Total

$
1,404,375



100.0
%

$
1,266,223



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, 2010 and 2009, all of the
    Companys fixed income securities were rated by S&P or
    Moodys. 38




---



##### Table of Contents



% of


% ofEstimated


UnrealizedContractual Maturity

Fair Value


LossDue after one year through five years


17
%


7
%Due after five years through ten years


23



17Due after ten years


57



72Asset-backed securities


3



4Total


100
%


100
%  39




---



##### Table of Contents



December 31, 2010


December 31, 2009Estimated


Gross


Estimated


GrossUnrealized Loss Aging

Fair Value


Unrealized Loss


Fair Value


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

$
223,778


$
6,350


$
162,087


$
2,36213-24 months










11,176



469Greater than 24 months


7,903



663



32,932



2,065Total investment grade


231,681



7,013



206,195



4,896Non-investment grade:0-6 months


11,256



83







Greater than 24 months


11,522



1,356



17,346



1,716Total non-investment grade


22,778



1,439



17,346



1,716Total

$
254,459


$
8,452


$
223,541


$
6,612     (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, 2010 and December 31, 2009,
    all of the Companys fixed income securities were rated by
    S&P or Moodys.  available-for-sale,
  other-than-temporary.
  other-than-temporary other-than-temporary
  other-than-temporary
  other-than-temporarily
 40




---



##### Table of Contents



other-than-temporarily
  other-than-temporary
  other-than-temporarily
      other-than-temporarily
   41




---



##### Table of Contents



Gross Unrealized Losses


EstimatedDecember 31, 2010

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

$



$



$



$



$




1
(b)

$
1,000Obligations of states and political subdivisions


628



3,166



1,960







5,754



32



165,796Corporate bonds










948



223



1,171



13



60,134Other asset-backed securities:Second mortgages/home equity loans  residential


84















84



1



1,755Other


4















4



1



2,996Total investment grade


716



3,166



2,908



223



7,013



48



231,681Non-investment grade:Obligations of states and political subdivisions


















1,084



1



9,756Corporate bonds


















83



8



11,256Other asset-backed securities:Second mortgages/home equity loans  residential


















272



1



1,766Total non-investment grade


















1,439



10



22,778Total

$
716


$
3,166


$
2,908


$
223


$
8,452



58


$
254,459     (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, 2010, all of the Companys fixed
    income securities were rated by S&P or Moodys.(b)

    
    The unrealized loss on this AAA-rated U.S. Government agency
    security is negligible and does not result in an amount when
    rounded to thousands of dollars.    Obligations
    of State and Political Subdivisions
     42




---



##### Table of Contents



Corporate
    Bonds
      Other
    Asset-backed Securities
  sub-prime
  sub-prime sub-prime
 43




---



##### Table of Contents



Risk-Based
    Capital (RBC) and Other Regulatory Ratios
  state-by-state
      Impact of
    Pending Accounting Standards
  No. 2010-26,
  No. 2010-28,
  FORWARD-LOOKING
    STATEMENTS
   44




---



##### Table of Contents




    general economic and business conditions;
    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 actual closing of contemplated transactions and agreements;
    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 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.   45




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      Estimated Fair


HypotheticalHypothetical


Value After


PercentageFair Value at


Change in


Hypothetical


Decrease inDecember 31,


Interest Rate


Change in


Stockholders2010


(bp=basis points)


Interest Rate


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

$
119,344200 bp increase


$
111,034



(0.5
)%150 bp increase



113,329



(0.4
)100 bp increase



115,538



(0.2
)50 bp increase



117,578



(0.1
)States, municipalities and political subdivisions


770,608200 bp increase



682,531



(5.4
)150 bp increase



703,332



(4.1
)100 bp increase



724,944



(2.8
)50 bp increase



747,360



(1.4
)Corporate bonds


476,873200 bp increase



436,507



(2.5
)150 bp increase



446,132



(1.9
)100 bp increase



456,064



(1.3
)50 bp increase



466,309



(0.6
)Mortgage-backed and asset-backed


37,550200 bp increase



36,031



(0.1
)150 bp increase



36,400



(0.1
)100 bp increase



36,776



50 bp increase



37,159



Total fixed income securities
    available-for-sale

$
1,404,375200 bp increase



1,266,103



(8.4
)150 bp increase



1,299,193



(6.4
)100 bp increase



1,333,322



(4.3
)50 bp increase



1,368,406



(2.2
)   46




---



##### Table of Contents



Estimated Fair


HypotheticalHypothetical


Value After


PercentageFair 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

$
157,128200 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


728,568200 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


344,109200 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


36,418200 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

$
1,266,223200 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
)  47




---



##### 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
    
    48




---



##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
      Internal Control
     Integrated Framework
  Form 10-K.
  
   49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            other-than-temporary
  Internal Control  Integrated Framework
  
    50




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
  December 31,2010


2009(Amounts in thousands, except per share data)AssetsInvested assets:Fixed income securities, at fair value (amortized cost:
    $1,353,347 and $1,219,270)

$
1,404,375


$
1,266,223Equity securities, at fair value (cost: $1,687 and $1,429)


1,916



1,610Short-term investments, at amortized cost (approximates fair
    value)


53,089



48,999Total invested assets


1,459,380



1,316,832Cash


7,313



5,822Deferred policy acquisition costs


98,572



99,836Insurance receivables:Premiums, including $10,840 and $9,753 from affiliates, (net of
    allowance for doubtful accounts: $1,410 and $1,110)


33,378



33,392Reinsurance


41,453



48,645Deposit with affiliated ceding company


23,446



26,878Goodwill 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: $38,931 and $37,514)


15,645



19,681Prepaid reinsurance premiums


164



210Accrued investment income


17,307



15,832Other assets


2,291



3,122Total assets

$
1,837,734


$
1,709,035LiabilitiesReserves:Unpaid losses and loss adjustment expenses

$
389,089


$
406,123Unearned premiums


245,986



247,776Total reserves


635,075



653,899Long-term debt


30,930



30,930Deferred income taxes, net


29,098



28,065Reinsurance and other payables to affiliates


177



548Accrued expenses


21,726



18,586Liability for postretirement benefits


12,330



10,718Payable for securities purchased






1,356Income tax payable


13,775



13,389Other liabilities


25,890



28,460Total liabilities


769,001



785,951Commitments and contingencies (See Notes 3, 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; 46,104 shares issued and 44,748 shares
    outstanding at December 31, 2010 and 45,635 shares
    issued and 44,268 shares outstanding at December 31,
    2009


461



456Additional paid-in capital


288,471



279,388Retained earnings


761,925



627,505Accumulated other comprehensive income


32,436



30,406Treasury stock, 1,356 and 1,367 shares, at cost


(14,560
)


(14,671
)Total stockholders equity


1,068,733



923,084Total liabilities and stockholders equity

$
1,837,734


$
1,709,035    51




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
  Years Ended December 31,2010


2009


2008(Amounts in thousands,except per share data)Revenues:Net earned premium

$
418,017


$
421,872


$
431,696Net investment income


53,591



50,371



47,302Net realized investment gains (losses):Other-than-temporary
    impairment losses






(1,870
)


(1,321
)Portion of
    other-than-temporary
    impairment losses recognized in other comprehensive income
    (before taxes)


(122
)


1,708



Net impairment losses recognized in earnings


(122
)


(162
)


(1,321
)Net realized investment gains (losses), excluding impairment
    losses


1,207



1,361



(53
)Total net realized investment gains (losses)


1,085



1,199



(1,374
)Total revenues


472,693



473,442



477,624Expenses:Net losses and loss adjustment expenses


45,235



69,416



80,844Net commissions, brokerage and other underwriting expenses


227,732



233,427



235,420Interest expense


1,164



1,391



2,148Other expense


1,474







Total expenses


275,605



304,234



318,412Income before income taxes


197,088



169,208



159,212Income tax expense


62,668



51,347



48,809Net income

$
134,420


$
117,861


$
110,403Earnings per common share

$
3.03


$
2.66


$
2.50Earnings per common share, assuming dilution

$
3.02


$
2.65


$
2.49Weighted average shares outstanding


44,376



44,247



44,145Weighted average shares outstanding, assuming dilution


44,559



44,397



44,260    52




---



##### 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, 2008


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: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
)

$
923,084Comprehensive income:Net income





$



$



$
134,420


$
134,420


$



$



$
134,420Other comprehensive income:Change in unrealized gains (losses) on securities, after income
    tax expense of $1,348 (net of reclassification adjustment of
    $682, after income tax expense of $367)














2,504







2,504







2,504Change in
    other-than-temporary
    impairment losses not recognized in the Consolidated Statements
    of Income, after income tax expense of $95 (net of
    reclassification adjustment of ($79), after income tax benefit
    of $43)














176







176







176Net change related to postretirement benefits, after income tax
    benefit of $350














(650
)






(650
)






(650
)Total comprehensive income













$
136,450















Stock-based compensation










1,758



















1,758Stock options exercised and other


480



5



7,325















111



7,441Balance, December 31, 2010


44,748


$
461


$
288,471






$
761,925


$
32,436


$
(14,560
)

$
1,068,733    53




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2010


2009


2008(Amounts in thousands)Cash Flows from Operating Activities:Net income

$
134,420


$
117,861


$
110,403Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


655



564



443Depreciation and amortization


6,172



6,055



5,809Amortization of bond premium, net


7,318



4,862



2,888(Gain) loss on disposal or impairment of property and equipment


(82
)


4,934



1,155Net realized investment (gains) losses


(1,085
)


(1,199
)


1,374Stock-based compensation


1,758



1,990



1,693Deferred income tax benefit


(973
)


(448
)


(1,406
)Changes in:Insurance receivables


6,551



45,799



34,593Reserve for unearned premiums


(1,790
)


(11,048
)


(106
)Reserve for unpaid losses and loss adjustment expenses


(17,034
)


(22,601
)


(44,118
)Deposit with affiliated ceding company


3,432



2,815



4,951Deferred policy acquisition costs


1,264



2,256



2,188Reinsurance and other payables to affiliates


(371
)


(1,132
)


1,037Prepaid reinsurance premiums


46



210



90Accrued expenses


3,140



(1,470
)


1,783Other assets and liabilities


(1,303
)


8,536



1,435Net cash provided by operating activities


142,118



157,984



124,212Cash Flows from Investing Activities:Fixed income securities:Purchases


(241,752
)


(362,262
)


(183,949
)Maturities


63,737



124,428



62,802Sales


37,608



56,654



24,402Purchases of equity securities


(413
)


(868
)


(550
)Proceeds from the sale of equity securities


193



648



626Changes in short-term investments


(4,031
)


31,693



(30,403
)Purchases of property and equipment, net


(2,054
)


(6,255
)


(6,952
)Changes in payables for securities purchased


(1,356
)


(7,042
)


8,398Other, net










200Net cash (used in) investing activities


(148,068
)


(163,004
)


(125,426
)Cash Flows from Financing Activities:Employee stock option exercises and other


7,441



1,246



580Net cash provided by financing activities


7,441



1,246



580Increase (decrease) in cash


1,491



(3,774
)


(634
)Cash at beginning of period


5,822



9,596



10,230Cash at end of period

$
7,313


$
5,822


$
9,596Supplemental Disclosure of Cash Flow Information:Cash paid during the period for:Interest

$
1,163


$
1,427


$
2,154Income taxes

$
62,087


$
39,793


$
46,600    54




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Significant
    Accounting Policies  Formation
    of CNA Surety Corporation and Merger
    CNAF
    Proposal
    CNAF
    Proposal  Subsequent Event
    Principles
    of Consolidation
    Estimates
    Investments
  available-for-sale,
 55




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  first-in,
  other-than-temporary
    other-than-temporarily
      Deferred
    Policy Acquisition Costs
   56




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Intangible
    Assets
        Reserves
    for Unpaid Losses and Loss Adjustment Expenses
    Insurance
    Premiums
     57




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Reinsurance
    Stock-Based
    Compensation
    Income
    Taxes
      Property
    and Equipment
    Earnings
    Per Share
   58




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2010


2009


2008Net income

$
134,420


$
117,861


$
110,403Shares:Weighted average shares outstanding


44,268



44,168



44,121Weighted average shares of options exercised and additional
    stock issuance


108



79



24Total weighted average shares outstanding


44,376



44,247



44,145Effect of dilutive options


183



150



115Total weighted average shares outstanding, assuming dilution


44,559



44,397



44,260Earnings per share

$
3.03


$
2.66


$
2.50Earnings per share, assuming dilution

$
3.02


$
2.65


$
2.49     Adopted
    Accounting Pronouncements
  No. 2009-16,
  No. 2009-17,
  Pending
    Accounting Pronouncements
  No. 2010-26,
 59




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    No. 2010-28,
  2.
    Investments    Years Ended December 31,2010


2009


2008Investment income:Fixed income securities

$
54,765


$
51,060


$
46,134Equity securities


39



39



56Short-term investments


85



127



1,340Other


49



62



45Total investment income on
    available-for-sale
    securities


54,938



51,288



47,575Investment income on deposit with affiliated ceding company


93



335



912Investment expenses


(1,440
)


(1,252
)


(1,185
)Net investment income

$
53,591


$
50,371


$
47,302  60




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale
  Years Ended December 31,2010


2009


2008Net realized investment gains (losses):Fixed income securities:Gross realized investment gains

$
1,225


$
1,731


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


(122
)


(116
)


(978
)Realized losses from sales


(56
)


(393
)


(19
)Total gross realized investment losses


(178
)


(509
)


(997
)Net realized investment gains (losses) on fixed income securities


1,047



1,222



(997
)Equity securities:Gross realized investment gains


38



44



13Gross realized investment losses:Other-than-temporary
    impairment losses






(46
)


(343
)Realized losses from sales






(20
)


(46
)Total gross realized investment losses






(66
)


(389
)Net realized investment gains (losses) on equity securities


38



(22
)


(376
)Other






(1
)


(1
)Net realized investment gains (losses)

$
1,085


$
1,199


$
(1,374
)Net change in unrealized gains (losses)Fixed income securities

$
4,075


$
54,123


$
(20,816
)Equity securities


48



181



(106
)Total net change in unrealized gains (losses)

$
4,123


$
54,304


$
(20,922
)Net realized gains (losses) and change in unrealized gains
    (losses)

$
5,208


$
55,503


$
(22,296
)   other-than-temporary
 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


Estimated


UnrealizedDecember 31, 2010

or Cost


Gains


12 Months


12 Months


Fair Value


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

$
17,288


$
914


$



$



$
18,202


$
U.S. Agencies


6,518



250











6,768



Collateralized mortgage obligations  residential


20,769



1,558











22,327



Mortgage pass-through securities  residential


68,727



3,320











72,047



Obligations of states and political subdivisions


746,514



30,932



(5,096
)


(1,742
)


770,608



Corporate bonds


456,963



21,164



(1,249
)


(5
)


476,873



Collateralized mortgage obligations  commercial


10,018



567











10,585



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


3,878







(84
)


(272
)


3,522



(927
)(a)Consumer credit receivables


9,998



158











10,156



Other


12,674



617



(4
)






13,287



Total fixed income securities


1,353,347



59,480



(6,433
)


(2,019
)


1,404,375


$
(927
)Equity securities


1,687



229











1,916Total

$
1,355,034


$
59,709


$
(6,433
)

$
(2,019
)

$
1,406,291     (a)

    
    The unrealized loss position of this security was
    $0.3 million at December 31, 2010. 62




---



##### Table of Contents



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


Gross Unrealized LossesAmortized Cost


Unrealized


Less Than


More Than


Estimated


UnrealizedDecember 31, 2009

or Cost


Gains


12 Months


12 Months


Fair Value


OTTI LossesFixed 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
)(a)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 was
    $0.5 million at December 31, 2009.    other-than-temporary other-than-temporary.
  other-than-temporary other-than-temporary
 63




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  other-than-temporary
  other-than-temporarily other-than-temporarily
  other-than-temporary
  other-than-temporary
  other-than-temporarily
      other-than-temporarily
   64




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  sub-prime
    Twelve Months EndedDecember 31,2010Beginning balance

$
116Credit losses for which an OTTI loss was not previously
    recognized


Credit losses for which an OTTI loss was previously recognized


122Ending balance

$
238     Nine Months 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
 65




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


2009Amortized


Estimated Fair


Amortized


Estimated FairCost


Value


Cost


ValueFixed income securities:Due within one year

$
39,649


$
40,035


$
13,006


$
13,224Due after one year but within five years


422,319



441,895



304,654



321,144Due after five years but within ten years


480,548



507,793



447,485



468,254Due after ten years


284,767



282,728



292,668



298,5341,227,283



1,272,451



1,057,813



1,101,156Mortgage pass-through securities, collateralized mortgage
    obligations and asset-backed securities


126,064



131,924



161,457



165,067$
1,353,347


$
1,404,375


$
1,219,270


$
1,266,223     % of


% ofEstimated


UnrealizedContractual Maturity

Fair Value


LossDue after one year through five years


17
%


7
%Due after five years through ten years


23



17Due after ten years


57



72Asset-backed securities


3



4Total


100
%


100
%     December 31, 2010


December 31, 2009Gross





GrossEstimated


Unrealized


Estimated


UnrealizedUnrealized Loss Aging

Fair Value


Loss


Fair Value


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

$
223,778


$
6,350


$
162,087


$
2,36213-24 months










11,176



469Greater than 24 months


7,903



663



32,932



2,065Total investment grade


231,681



7,013



206,195



4,896Non-investment grade:0-6 months


11,256



83







Greater than 24 months


11,522



1,356



17,346



1,716Total non-investment grade


22,778



1,439



17,346



1,716Total

$
254,459


$
8,452


$
223,541


$
6,612     (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, 2010 and 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)
       Gross Unrealized Losses


Estimated FairDecember 31, 2010

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

$



$



$



$



$




1
(b)

$
1,000Obligations of states and political subdivisions


628



3,166



1,960







5,754



32



165,796Corporate bonds










948



223



1,171



13



60,134Other asset-backed securities:Second mortgages/home equity loans  residential


84















84



1



1,755Other


4















4



1



2,996Total investment grade


716



3,166



2,908



223



7,013



48



231,681Non-investment grade:Obligations of states and political subdivisions


















1,084



1



9,756Corporate bonds


















83



8



11,256Other asset-backed securities:Second mortgages/home equity loans  residential


















272



1



1,766Total non-investment grade


















1,439



10



22,778Total

$
716


$
3,166


$
2,908


$
223


$
8,452



58


$
254,459     (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, 2010, all of the Companys fixed
    income securities were rated by S&P or Moodys.(b)

    
    The unrealized loss on this AAA-rated U.S. Government agency
    security is negligible and does not result in an amount when
    rounded to thousands of dollars.   67




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      sub-prime
      sub-prime sub-prime
 68




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          3.
    Debt  30-year
        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. 69




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Fixed
    Income Securities
    Equity
    Securities
    Short-Term
    Investments
   70




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31, 2010Fair Value Measurement 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

$
18,202


$



$



$
18,202U.S. Agencies






6,768







6,768Collateralized mortgage obligations  residential






22,327







22,327Mortgage pass-through securities  residential






72,047







72,047Obligations of states and political subdivisions






770,608







770,608Corporate bonds






476,873







476,873Collateralized mortgage obligations  commercial






10,585







10,585Other asset-backed securities:Second mortgages/home equity loans  residential






3,522







3,522Consumer credit receivables






10,156







10,156Other






13,287







13,287Total fixed income securities


18,202



1,386,173







1,404,375Equity securities at fair value


1,916











1,916Short-term investments at fair
    value(a)


16,842



36,247







53,089Total assets

$
36,960


$
1,422,420


$



$
1,459,380     (a)

    
    Includes commercial paper, U.S. Government agency discount notes
    and money market funds.  71




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2009Fair Value Measurement 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.  5.
    Deferred
    Policy Acquisition Costs and Other Operating Expenses    Years Ended December 31,2010


2009


2008Balance at beginning of period

$
99,836


$
102,092


$
104,280Costs deferred


166,755



166,434



171,117Amortization


(168,019
)


(168,690
)


(173,305
)Balance at end of period

$
98,572


$
99,836


$
102,092  72




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2010


2009


2008Amortization of deferred policy acquisition costs

$
168,019


$
168,690


$
173,305Other operating expenses


59,713



64,737



62,115Net commissions, brokerage and other underwriting expenses

$
227,732


$
233,427


$
235,420   6.
    Reinsurance        Years Ended December 31,2010


2009


2008Written


Earned


Written


Earned


Written


EarnedDirect

$
347,896


$
349,718


$
347,646


$
351,519


$
358,625


$
357,771Assumed


92,258



92,225



90,659



97,833



108,502



109,463Ceded


(23,880
)


(23,926
)


(27,271
)


(27,480
)


(35,448
)


(35,538
)Net premiums

$
416,274


$
418,017


$
411,034


$
421,872


$
431,679


$
431,696      73




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Years Ended December 31,2010


2009


2008$


Ratio


$


Ratio


$


RatioGross losses and loss adjustment expenses

$
35,689



8.1
%

$
76,564



17.0
%

$
93,151



19.9
%Ceded losses and loss adjustment expenses


9,546



(39.9
)%


(7,148
)


26.0
%


(12,307
)


34.6
%Net losses and loss adjustment expenses

$
45,235



10.8
%

$
69,416



16.5
%

$
80,844



18.7
%     Excess of
    Loss Reinsurance
    2009
    Third Party Reinsurance
    2010
    Third Party Reinsurance
   74




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2011
    Third Party Reinsurance
    Related
    Party Reinsurance
         75




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               76




---



##### 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 31,2010


2009


2008Reserves at beginning of year:Gross

$
406,123


$
428,724


$
472,842Ceded reinsurance


50,968



83,691



150,496Net reserves at beginning of year


355,155



345,033



322,346Net incurred loss and loss adjustment expenses:Provision for insured events of current year


121,564



123,698



126,345Decrease in provision for insured events of prior years


(76,329
)


(54,282
)


(45,501
)Total net incurred


45,235



69,416



80,844Net payments attributable to:Current year events


16,235



15,571



11,954Prior year events


38,183



43,723



46,203Total net payments


54,418



59,294



58,157Foreign currency transaction adjustments


110







Net reserves at end of year


346,082



355,155



345,033Ceded reinsurance at end of year


43,007



50,968



83,691Gross reserves at end of year

$
389,089


$
406,123


$
428,724          77




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      8.
    Commitments
    and Contingencies        9.
    Income
    Taxes    2010


2009Deferred tax assets related to:Unearned premium reserve

$
17,345


$
17,478Loss and loss adjustment expense reserve


4,057



4,251Accrued expenses


2,212



2,005Accumulated postretirement benefit obligation


4,349



4,322Policyholder dividends


2,717



2,795Other


2,629



2,893Total deferred tax assets


33,309



33,744Deferred tax liabilities related to:Deferred policy acquisition costs


34,500



34,943Intangible assets


5,650



5,650Unrealized net gains on securities


17,940



16,496Difference between book and tax depreciation


2,580



3,292Other


1,737



1,428Total deferred tax liabilities


62,407



61,809Net deferred tax liability

$
29,098


$
28,065    78




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Years Ended December 31,2010


2009


2008Current tax expense

$
63,641


$
51,795


$
50,215Deferred tax benefit


(973
)


(448
)


(1,406
)Total income tax expense

$
62,668


$
51,347


$
48,809     Years Ended December 31,2010


2009


2008Federal statutory rate


35.0
%


35.0
%


35.0
%Tax-exempt income deduction


(4.5
)


(5.3
)


(5.3
)Non-deductible expenses


0.1



0.2



0.2State income tax, net of federal income tax benefit


0.8



0.7



0.8Other


0.4



(0.3
)


Total income tax expense


31.8
%


30.3
%


30.7
%       10.
    Employee
    Benefits       79




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          2010


2009Reconciliation of benefit obligation:Benefit obligation at beginning of the year

$
10,718


$
9,283Service cost


222



228Interest cost


617



572Actuarial loss


890



681Benefits and expenses paid


(199
)


(132
)Plan participant contributions


61



60Medicare subsidy received


21



26Benefit obligation at end of year

$
12,330


$
10,718      80




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


2009


2008Amounts not yet recognized in net periodic benefit cost:Net prior service benefit

$
(77
)

$
(187
)

$
(349
)Net actuarial loss


1,858



968



288Total pre-tax accumulated other comprehensive loss (income)

$
1,781


$
781


$
(61
)Pre-tax accumulated other comprehensive loss
    (income)   beginning of year related to
    postretirement benefit obligation

$
781


$
(61
)

$
1,017Reclassification adjustments recognized in net periodic benefit
    cost:Amortization of prior service cost


110



162



162Amortization of net actuarial loss






(1
)


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


890



681



(1,240
)Pre-tax accumulated other comprehensive loss
    (income)  end of year, related to postretirement
    benefit obligation

$
1,781


$
781


$
(61
)       2010


2009Liability for postretirement benefits

$
12,330


$
10,718Deferred income taxes, net


(4,349
)


(4,322
)Accumulated other comprehensive loss, net of tax


881



231     Difference Due toIncluding Effects


Without Effects of


Effects ofof Tax-Free Subsidy


Tax-Free Subsidy


Tax-Free SubsidyDecember 31, 2010

$
12,330


$
14,170


$
1,840December 31, 2009

$
10,718


$
12,349


$
1,631     2010


2009


2008Net periodic benefit cost:Service cost

$
222


$
228


$
192Interest cost


617



572



486Amortization of prior service cost (benefit)


(110
)


(162
)


(162
)Net amortization of actuarial loss






1



Net periodic benefit cost

$
729


$
639


$
516  81




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2010


2009


2008Key Assumptions:Discount rate


5.560
%


5.960
%


5.870
%Rate of compensation increases (postretirement sick leave plan
    only)


3.0
%


3.0
%


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


9.0
%


9.0
%


9.0
%Initial health care cost trend rate, post-Medicare


9.0
%


9.0
%


9.0
%Ultimate health care cost trend rate


5.0
%


5.0
%


5.0
%Year in which ultimate trend rate is reached


2019



2018



2017Mortality


IRS Prescribed 2010
    Generational
    Mortality



IRS Prescribed 2008
    Generational
    Mortality



RP 2000 ProjectedAverage remaining service life  postretirement
    medical benefit plan


11.5 Years



11.8 Years



12.3 YearsAverage life expectancy  postretirement medical
    benefit plan


14.3 Years



14.0 Years



14.0 YearsAverage remaining service life  sick leave plan


10.8 Years



11.4 Years



12.3 Years         Amortization of prior service cost (benefit)

$
(57
)Amortization of net actuarial loss


64Total estimated cost to be recognized

$
7  82




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Before Impact of Federal Subsidy

Net of Federal Subsidy2011

$
248


$
2152012


287



2512013


339



2992014


465



4192015


529



4822016-2020


3,388



3,070   11.
    Stockholders
    Equity    Equity
    Compensation Plans
           83




---



##### 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, 2010


1,318,288


$
15.78Options granted


281,260


$
14.32Options forfeited


(31,595
)

$
16.83Options expired


(5,515
)

$
20.02Options exercised


(469,257
)

$
15.04Outstanding options at December 31, 2010


1,093,181


$
15.67     WeightedAverageShares Subject


Grant Dateto Option


Fair ValueNon-vested options at January 1, 2010


539,396


$
8.10Options granted


281,260


$
7.25Options vested


(185,202
)

$
8.14Options forfeited


(31,595
)

$
7.73Non-vested options at December 31, 2010


603,859


$
7.71       Options OutstandingWeighted Average



Options ExercisableNumber

Remaining

Weighted Average

Number

Weighted AverageRange of Exercise Prices

Outstanding

Contractual Life

Exercise Price

Exercisable

Exercise Price$9.35 to $10.58


112,750



2.6 years


$
9.63



112,750


$
9.63$12.06 to $14.61


451,005



7.2 years



13.66



181,625



12.67$16.35 and above


529,426



7.1 years



18.67



194,947



19.14  84




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##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Vested or Expected to VestWeighted



Weighted AverageAverage

Aggregate

RemainingNumber

Exercise Price

Intrinsic Value

Contractual LifeDecember 31, 2010


1,040,805


$
15.62


$
8,387,873



6.6 years   Options ExercisableWeighted



Weighted AverageAverage

Aggregate

RemainingNumber

Exercise Price

Intrinsic Value

Contractual LifeDecember 31, 2010


489,322


$
14.55


$
4,468,969



4.9 years         12.
    Segment
    Information      and/or
 85




---



##### Table of Contents



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





% of





% of2010


Total


2009


Total


2008


TotalContract

$
278,375



63.2
%

$
274,848



62.7
%

$
300,236



64.3
%Commercial:License and permit


75,133



17.1



75,594



17.3



80,291



17.2Judicial and fiduciary


22,250



5.1



22,941



5.2



23,227



5.0Public official


25,111



5.7



25,707



5.9



23,466



5.0Other


8,822



2.0



9,306



2.1



9,015



1.9Total commercial


131,316



29.9



133,548



30.5



135,999



29.1Fidelity and other


30,463



6.9



29,909



6.8



30,892



6.6$
440,154



100.0
%

$
438,305



100.0
%

$
467,127



100.0
%Domestic

$
430,901



97.9
%

$
432,260



98.6
%

$
461,998



98.9
%International


9,253



2.1



6,045



1.4



5,129



1.1$
440,154



100.0
%

$
438,305



100.0
%

$
467,127



100.0
%   Net Written Premiums% of





% of





% of2010


Total


2009


Total


2008


TotalContract

$
257,410



61.8
%

$
250,793



61.0
%

$
268,085



62.1
%Commercial


128,401



30.9



130,332



31.7



132,702



30.7Fidelity and other


30,463



7.3



29,909



7.3



30,892



7.2$
416,274



100.0
%

$
411,034



100.0
%

$
431,679



100.0
%Domestic

$
407,021



97.8
%

$
404,989



98.5
%

$
426,570



98.8
%International


9,253



2.2



6,045



1.5



5,109



1.2$
416,274



100.0
%

$
411,034



100.0
%

$
431,679



100.0
%    86




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Statutory
    Financial Data (unaudited)          2010


2009Consolidated equity per GAAP

$
1,068,733


$
923,084Impact of non-insurance companies and eliminations


13,139



16,820Insurance company equity per GAAP


1,081,872



939,904Intangible assets


(133,361
)


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


(52,467
)


(48,669
)Deferred policy acquisition costs


(98,572
)


(99,836
)Deferred income taxes, net


48,296



48,513Accumulated postretirement benefit obligations


1,781



781Non-admitted assets


(21,910
)


(28,030
)Total statutory capital and surplus per statutory accounting
    practices

$
825,639


$
679,302   state-by-state
 87




---



##### Table of Contents



CNA
    SURETY CORPORATION AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    14.
    Related
    Party Transactions    and/or
     88




---



##### 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


Quarter2010Revenues

$
111,952


$
118,739


$
123,748


$
118,254Income before income taxes

$
30,302


$
41,047


$
44,745


$
80,994Income tax expense


9,497



12,422



14,258



26,491Net income

$
20,805


$
28,625


$
30,487


$
54,503Basic earnings per common share

$
0.47


$
0.65


$
0.69


$
1.22Diluted earnings per common share

$
0.47


$
0.64


$
0.69


$
1.212009Revenues

$
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


$
1.11    89




---



##### 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.
 90




---



##### Table of Contents



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


92Schedule II  Condensed Financial
    Information of Registrant


93Schedule III  Supplementary
    Insurance Information


97Schedule IV  Reinsurance


98Schedule V  Valuation and
    Qualifying Accounts


99Schedule VI  Supplemental
    Information Concerning Property  Casualty Insurance
    Operations


100(a)(3) Exhibits


101  91




---



##### Table of Contents



SCHEDULE I  CNA
    SURETY CORPORATION AND SUBSIDIARIES
    SUMMARY OF INVESTMENTS
    OTHER THAN INVESTMENTS IN RELATED PARTIES
    As of December 31, 2010 and 2009
   As of December 31, 2010Cost orAmortized


Fair


CarryingCost


Value


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

$
113,302


$
119,344


$
119,344States, municipalities and political subdivisions


746,514



770,608



770,608All other bonds, including corporate bonds and other
    asset-backed securities


493,531



514,423



514,423Total fixed income securities


1,353,347



1,404,375



1,404,375Equity securities


1,687



1,916



1,916Short-term investments


53,089







53,089Total investments

$
1,408,123






$
1,459,380   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  92




---



##### Table of Contents



SCHEDULE II  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)
    BALANCE SHEETS
  December 31,2010


2009(Amounts in thousands)AssetsInvestments in and advances to subsidiaries

$
1,076,874


$
933,907Equity investments (cost: $1,687 and $1,429)


1,916



1,610Short-term investments, at cost (which approximates fair value)


13,428



12,071Cash


3,265



1,894Other assets


7,892



7,220Total assets

$
1,103,375


$
956,702LiabilitiesLong-term debt

$
30,930


$
30,930Other liabilities


3,712



2,688Total liabilities


34,642



33,618Stockholders EquityCommon stock


461



456Additional paid-in capital


288,471



279,388Retained earnings


761,925



627,505Accumulated other comprehensive income


32,436



30,406Treasury stock, at cost


(14,560
)


(14,671
)Total stockholders equity


1,068,733



923,084Total liabilities and stockholders equity

$
1,103,375


$
956,702    93




---



##### Table of Contents



SCHEDULE II
  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)  (Continued)
    STATEMENTS OF INCOME
  Years Ended December 31,2010


2009


2008(Amounts in thousands)Revenues:Net investment income

$
100


$
121


$
347Net realized investment gains (losses):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), excluding impairment
    losses


38



(40
)


(376
)Total net realized investment gains (losses)


38



(40
)


(376
)Total revenues


138



81



(29
)Expenses:Interest expense


1,164



1,391



2,148Corporate expense


6,135



8,581



6,968Other expense


1,474







Total expenses


8,773



9,972



9,116Loss from operations before income taxes and equity in net
    income of subsidiaries


(8,635
)


(9,891
)


(9,145
)Income tax benefit


(3,137
)


(3,515
)


(3,161
)Net loss before equity in net income of subsidiaries


(5,498
)


(6,376
)


(5,984
)Equity in net income of subsidiaries


139,918



124,237



116,387Net income

$
134,420


$
117,861


$
110,403    94




---



##### Table of Contents



SCHEDULE II
  CNA
    SURETY CORPORATION
    CONDENSED FINANCIAL INFORMATION OF REGISTRANT
    (PARENT COMPANY)  (Continued)
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2010


2009


2008(Amounts in thousands)Cash Flows from Operating Activities:Net income

$
134,420


$
117,861


$
110,403Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:Equity in net income of subsidiaries


(139,918
)


(124,237
)


(116,387
)Depreciation and amortization






38



101Net realized investment (gains) losses


(38
)


40



376Stock-based compensation


1,758



1,990



1,693Deferred income tax benefit


(709
)


(752
)


(490
)Cash dividends from subsidiaries


500



5,000



3,000Tax payments received from subsidiaries


61,881



41,273



48,570Federal income tax payments


(60,500
)


(38,718
)


(45,248
)Changes in:Accrued expenses


1,173



409



(701
)Other assets and liabilities


(2,714
)


(2,840
)


(2,048
)Net cash (used in) provided by operating activities


(4,147
)


64



(731
)Cash Flows from Investing Activities:Net advances (to) from subsidiaries


(346
)


(246
)


1,152Purchases of equity securities


(413
)


(868
)


(550
)Proceeds from sales of equity securities


193



631



626Changes in short-term investments


(1,357
)


(3,538
)


(1,239
)Net cash (used in) investing activities


(1,923
)


(4,021
)


(11
)Cash Flows from Financing Activities:Employee stock option exercises and other


7,441



1,246



580Net cash provided by financing activities


7,441



1,246



580Increase (decrease) in cash


1,371



(2,711
)


(162
)Cash at beginning of period


1,894



4,605



4,767Cash at end of period

$
3,265


$
1,894


$
4,605    95




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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   96




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##### Table of Contents



SCHEDULE III
  CNA
    SURETY CORPORATION AND SUBSIDIARIES
    SUPPLEMENTARY INSURANCE INFORMATION
    As of and for the Years Ended
    December 31, 2010, 2009 and 2008
   Years Ended December 31,2010


2009


2008(Amounts in thousands)Deferred policy acquisition costs

$
98,572


$
99,836Unpaid loss and loss adjustment expense reserves

$
389,089


$
406,123Unearned premiums

$
245,986


$
247,776Net premium revenue

$
418,017


$
421,872


$
431,696Net investment income

$
53,591


$
50,371


$
47,302Benefits, claims, losses and settlement expenses

$
45,235


$
69,416


$
80,844Amortization of deferred policy acquisition costs

$
168,019


$
168,690


$
173,305Other operating expenses

$
59,713


$
64,737


$
62,115Net premiums written

$
416,274


$
411,034


$
431,679  97




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##### Table of Contents



SCHEDULE IV
  CNA
    SURETY CORPORATION AND SUBSIDIARIES
  REINSURANCE
 For the
    Years Ended December 31, 2010, 2009 and 2008
  PercentageCeded to


Assumed





of AmountGross


Other


from Other


Net


AssumedAmount


Companies


Companies(1)


Amount


to Net(Amounts in thousands)Year Ended December 31, 2010Premiums written:Property and casualty insurance

$
347,896


$
23,880


$
92,258


$
416,274



22.2
%Total premiums written

$
347,896


$
23,880


$
92,258


$
416,274



22.2
%Premiums earned:Property and casualty insurance

$
349,718


$
23,926


$
92,225


$
418,017



22.1
%Total premiums earned

$
349,718


$
23,926


$
92,225


$
418,017



22.1
%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
%     (1)

    
    Primarily from affiliates. 98




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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, 2010, 2009 and
    2008
  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, 2010Allowance for doubtful accounts on premiums receivable

$
1,110


$
655


$



$
355


$
1,410Allowance for doubtful accounts on reinsurance receivable

$



$



$



$



$
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

$



$



$



$



$
     (1)

    
    Write-offs charged against allowance. 99




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##### Table of Contents



SCHEDULE VI
  CNA
    SURETY CORPORATION AND SUBSIDIARIES
    SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY
    INSURANCE OPERATIONS
    As of and for the Years Ended December 31, 2010, 2009 and
    2008
  Years Ended December 31,2010


2009


2008(Amounts in thousands)Deferred policy acquisition costs

$
98,572


$
99,836Reserves for unpaid claims and claim adjustment expenses

$
389,089


$
406,123Discount (if any) deducted

$



$
Unearned premiums

$
245,986


$
247,776Net premium revenue

$
418,017


$
421,872


$
431,696Net investment income

$
53,591


$
50,371


$
47,302Net claims and claim expenses incurred related to:Current year

$
121,564


$
123,698


$
126,345Prior years

$
(76,329
)

$
(54,282
)

$
(45,501
)Amortization of deferred policy acquisition costs

$
168,019


$
168,690


$
173,305Net paid claims and claim adjustment expenses

$
54,418


$
59,294


$
58,157Net premiums written

$
416,274


$
411,034


$
431,679  100




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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
(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).10
(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
(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). 101




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##### Table of Contents



ExhibitNumber

Description10
(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 (filed
    on February 19, 2010 as Exhibit 10(46) to CNA Surety
    Corporations
    Form 10-K,
    and incorporated herein by reference).10
(47)

Form of Canadian Services and Indemnity Agreement by and between
    Western Surety Company and Continental Casualty Company (filed
    on February 19, 2010 as Exhibit 10(47) to CNA Surety
    Corporations
    Form 10-K,
    and incorporated herein by reference).10
(48)

Form of Surety Canada Quota Share Treaty by and between Western
    Surety Company and Continental Casualty Company (filed on
    February 19, 2010 as Exhibit 10(48) to CNA Surety
    Corporations
    Form 10-K,
    and incorporated herein by reference).10
(49)

Form of Administrative Services Agreement by and between Western
    Surety Company and Continental Casualty Company (filed on
    April 30, 2010 as Exhibit 10(49) to CNA Surety
    Corporations
    Form 10-Q,
    and incorporated herein by reference).10
(50)

Form of General Release and Settlement Agreement with CNA Surety
    Corporation and Thomas Pottle, Senior Vice President (filed on
    October 6, 2010 as Exhibit 10(49) to CNA Surety
    Corporations
    Form 8-K,
    and incorporated herein by reference).10
(51)

Form of Surety Quota Share Treaty effective January 1, 2011
    by and between Western Surety Company and Continental Casualty
    Company.10
(52)

Form of Surety Canada Quota Share Treaty effective
    January 1, 2011 by and between Western Surety Company and
    Continental Casualty Company.10
(53)

Form of Services and Indemnity Agreement effective
    January 1, 2011 by and between Western Surety Company and
    Continental Casualty Company.10
(54)

Form of Canadian Services and Indemnity Agreement effective
    January 1, 2011 by and between Western Surety Company and
    Continental Casualty Company. 102




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##### Table of Contents



ExhibitNumber

Description11


Not Applicable.12


Not Applicable.13


Not Applicable.16


Not Applicable.18


Not Applicable.21


Subsidiaries of the Registrant.22


Not Applicable.23


Consent of Deloitte & Touche LLP dated
    February 18, 2011.24


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)

Written Statement Pursuant to 18 U.S.C. Section 1350,
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002-Chief Executive Officer.32
(2)

Written Statement Pursuant to 18 U.S.C. Section 1350,
    as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002-Chief Financial Officer.  103




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##### Table of Contents



SIGNATURES
      /s/  JOHN
    F. WELCH       JOHN
    F. CORCORAN
          Date

Title

SignatureFebruary 18, 2011

Chairman of the Board
    and Director

/s/  DAVID
    B. EDELSONDavid
    B. EdelsonFebruary 18, 2011

Director

/s/  PHILIP
    H. BRITTPhilip
    H. BrittFebruary 18, 2011

Director

/s/  ANTHONY
    S. CLEBERGAnthony
    S. ClebergFebruary 18, 2011

Director

/s/  D.
    CRAIG MENSED.
    Craig MenseFebruary 18, 2011

Director

/s/  ROBERT
    A. TINSTMANRobert
    A. TinstmanFebruary 18, 2011

Director

/s/  JOHN
    F. WELCHJohn
    F. WelchFebruary 18, 2011

Director

/s/  PETER
    W. WILSONPeter
    W. Wilson  104