<PAGE>   1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K
                            ------------------------

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

[ ]  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)

<TABLE>
<S>                                                           <C>
                       DELAWARE                                            36-4144905
   (STATE OR OTHER JURISDICTION OF INCORPORATION OR           (I.R.S. EMPLOYER IDENTIFICATION NO.)
                      ORGANIZATION)

             CNA PLAZA, CHICAGO, ILLINOIS                                    60685
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                            (ZIP CODE)
</TABLE>

                                 (312) 822-5000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
                            ------------------------
        Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $0.01 PAR VALUE
                                (Title of Class)
                            ------------------------

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   [ ]

     The aggregate market value of voting stock held by nonaffiliates was $198.4
million based upon the closing price of $12.97 per share on March 9, 2001, using
beneficial ownership of stock rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934 to exclude voting stock owned by Directors,
Officers and Major Stockholders, some of whom may not be held to be affiliates
upon judicial determination.

     At March 9, 2001, 42,723,758 shares of the Registrant's Common Stock were
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the CNA Surety Corporation 2000 Annual Report to Shareholders
are incorporated by reference into Part II of this report.

     Portions of the CNA Surety Corporation Proxy Statement prepared for the
2001 annual meeting of shareholders, pursuant to Regulation 14A, are
incorporated by reference into Part III of this report.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              PAGE
                                                                              ----
<S>           <C>                                                             <C>
PART I
 Item 1.      Business....................................................      3
              General.....................................................      3
              Formation of CNA Surety and Merger..........................      3
              Proposed Tender Offer.......................................      3
              Description of Business.....................................      4
              Financial Strength Ratings..................................      4
              Product Information.........................................      4
              Marketing...................................................      7
              Underwriting................................................      8
              Competition.................................................      8
              Reinsurance.................................................      8
              Reserves for Unpaid Losses and Loss Adjustment Expenses.....      9
              Claims......................................................     11
              Asbestos and Environmental Claims...........................     11
              Regulation..................................................     12
              Investments.................................................     13
              Employees...................................................     13
 Item 2.      Properties..................................................     13
 Item 3.      Legal Proceedings...........................................     14
 Item 4.      Submission of Matters to a Vote of Security Holders.........     14
PART II
 Item 5.      Market for the Registrant's Common Stock and Related
              Stockholder Matters.........................................     14
 Item 6.      Selected Financial Data.....................................     15
 Item 7.      Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................     16
 Item 7a.     Quantitative and Qualitative Discussions About Market
              Risk........................................................     16
 Item 8.      Financial Statements and Supplementary Data.................     17
 Item 9.      Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure....................................     17
PART III
 Item 10.     Directors and Executive Officers of the Registrant..........     18
 Item 11.     Executive Compensation......................................     18
 Item 12.     Security Ownership of Certain Beneficial Owners and
              Management..................................................     18
 Item 13.     Certain Relationships and Related Transactions..............     18
PART IV
 Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form
              8-K.........................................................     18
</TABLE>

                                        2
<PAGE>   3

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                                     PART I

ITEM 1. BUSINESS

GENERAL

     CNA Surety Corporation ("CNA Surety" or "Company") is an insurance holding
company in the United States formed through the September 30, 1997 combination
of the surety business of CNA Financial Corporation with Capsure Holdings
Corp.'s ("Capsure") insurance subsidiaries. CNA Surety is currently one of the
largest surety providers in the United States with approximately an 8.4% market
share (based upon 1999 A.M. Best written premium data). Its wide selection of
products range from very small commercial bonds to large contract bonds.

FORMATION OF CNA SURETY AND MERGER

     In December 1996, CNA Financial Corporation ("CNAF") and Capsure Holdings
Corp. ("Capsure") agreed to merge (the "Merger") the surety business of CNAF
with Capsure's insurance subsidiaries, Western Surety Company ("Western Surety")
and Universal Surety of America ("USA"), into CNA Surety Corporation ("CNA
Surety" or the "Company"). CNAF, through its operating subsidiaries, writes
multiple lines of property and casualty insurance, including surety business
that is reinsured by Western Surety. CNAF owns approximately 64% of the
outstanding common stock of CNA Surety. Loews Corporation owns approximately 87%
of the outstanding common stock of CNAF. The principal operating subsidiaries of
CNAF that wrote the surety line of business for their own account prior to the
Merger were Continental Casualty Company and its property and casualty
affiliates (collectively, "CCC") and The Continental Insurance Company and its
property and casualty affiliates (collectively, "CIC"). CIC was acquired by CNAF
on May 10, 1995. The combined surety operations of CCC and CIC are referred to
herein as CCC Surety Operations ("Predecessor").

     Pursuant to a reorganization agreement, CCC Surety Operations and Capsure
merged their respective operations at the close of business on September 30,
1997 ("Merger Date"). CNAF, through its property and casualty subsidiaries, CCC
and CIC, contributed $52.25 million of capital to CNA Surety. Through
reinsurance agreements, CCC and CIC ceded to Western Surety all of their net
unearned premiums and loss and loss adjustment expense reserves, as of the
Merger Date, and will cede to Western Surety all surety business written or
renewed by CCC and CIC for a period of five years thereafter. Further, CCC and
CIC have agreed to assume the obligation for any adverse development on recorded
reserves for CCC Surety Operations as of the Merger Date, to limit the loss
ratio on certain defined business written by CNA Surety through December 31,
2000 and to provide certain additional excess of loss reinsurance.

PROPOSED TENDER OFFER

     On March 20, 2000, CCC proposed a cash tender offer to purchase the
remaining common stock of CNA Surety that it and its affiliates did not own for
$13.00 per share. On May 26, 2000, CCC informed CNA Surety that CCC did not
intend to pursue a proposed tender offer to acquire the remaining equity
interests of the Company not currently owned by CCC. The Company recorded a
non-recurring charge of $0.5 million before income taxes, or $0.3 million after
tax (1 cent per share), for costs incurred with respect to the proposed tender
offer by CCC.

     As reported in CNAF public filings, CCC and other insurance subsidiaries of
CNAF that own shares of CNA Surety may review their respective positions of CNA
Surety shares from time to time and may acquire additional shares or dispose of
shares depending upon market conditions or other factors existing at the time of
such review, resulting in increases or decreases in their respective ownership
positions.

                                        3
<PAGE>   4

DESCRIPTION OF BUSINESS

     CNA Surety's insurance subsidiaries write surety and fidelity bonds in all
50 states through a combined network of approximately 37,000 independent
agencies. CNA Surety's principal insurance subsidiaries are Western Surety and
USA. The insurance subsidiaries write, on a direct basis or as business assumed
from CCC and CIC, small fidelity and non-contract surety bonds, referred to as
commercial bonds; small, medium and large contract bonds; international surety
and credit insurance; and errors and omissions ("E&O") liability insurance.
Western Surety is a licensed insurer in all 50 states and the District of
Columbia. USA is licensed in 44 states and the District of Columbia. Western
Surety's affiliated company, Surety Bonding Company of America ("SBCA"), is
licensed in 25 states and the District of Columbia.

FINANCIAL STRENGTH RATINGS

     A.M. BEST COMPANY, INC. ("A.M. BEST")

     Western Surety and USA are both currently rated A+ (Superior), by A.M.
Best. An A+ (Superior) rating is assigned to those companies which A.M. Best
believes have achieved superior overall performance when compared to the norms
of the property and casualty insurance industry. A+ (Superior) rated insurers
have been shown to be among the strongest in ability to meet policyholder and
other contractual obligations. Through intercompany reinsurance and related
agreements, CNA Surety's customers will continue to have access to CCC's broader
underwriting capacity. CCC is currently rated A by A.M. Best. A.M. Best's letter
ratings range from A++ (Superior) to D (Poor) with A++ being highest.

     STANDARD AND POOR'S ("S&P")

     Western Surety and USA are both currently rated A (Strong), by S&P. CCC is
currently rated A by S&P. S&P's letter ratings range from AAA+ (Extremely
Strong) to CC (Extremely Weak) with AAA+ being highest. An insurer rated 'A' has
strong financial security characteristics, but is somewhat more likely to be
affected by adverse business conditions than are insurers with higher ratings.

PRODUCT INFORMATION

     According to the Surety Association of America ("SAA") industry estimates,
approximately 80% of the $3.3 billion United States surety market is represented
by bonds required by federal statutes, state laws, and local ordinances. These
bonding requirements range from federal construction projects, where the
contractor is required to post performance and payment bonds which guarantee
performance of contracts to the government as well as payment of bills to
subcontractors and suppliers, to license and permit bonds which guarantee
compliance with legal requirements for business operations.

     PRODUCTS AND POLICIES

     Unlike a standard, two-party insurance policy, surety bonds are three-party
agreements in which the issuer of the bond (the surety) joins with a second
party (the principal) in guaranteeing to a third party (the owner/obligee) the
fulfillment of some obligation on the part of the principal. The surety is the
party who guarantees fulfillment of the principal's obligation to the obligee.
In addition, sureties are generally entitled to recover from the principal any
losses and expenses paid to third parties. The surety's responsibility is to
evaluate the risk and determine if the principal meets the underwriting
requirements for the bond. Accordingly, surety bond premiums primarily reflect
the type and class of risk and related costs associated with both processing the
bond transaction and investigating the applicant including, if necessary, an
analysis of the applicant's creditworthiness and ability to perform.

     There are two broad types of surety products -- contract surety and
commercial surety bonds. Contract surety bonds secure a contractor's performance
and/or payment obligation generally with respect to a construction project.
Contract surety bonds are generally required by federal, state and local
governments for public works projects. Commercial surety bonds include all
surety bonds other than contract and cover obligations typically required by law
or regulation.

                                        4
<PAGE>   5

     Contract bond guarantee obligations include the following:

          Bid bonds: used by contractors submitting proposals on potential
     contracts.

          Performance bonds: guarantee to the owner the performance of the
     contractor's obligations according to the terms and conditions of the
     contract.

          Payment bonds: guarantee payment of the contractor's obligations under
     the contract for labor, subcontractors, and materials supplied to the
     project. Payment bonds are utilized in public projects where liens are not
     permitted.

     Other examples of contract bonds are completion, maintenance and supply
bonds.

     Commercial surety business is comprised of bonds covering obligations
typically required by law or regulation, such as the following:

          License and Permit bonds: required by statutes or ordinances for a
     number of purposes including guaranteeing the payment of certain taxes and
     fees and providing consumer protection as a condition to granting licenses
     related to selling real estate or motor vehicles and contracting services.

          Judicial and Fiduciary bonds: required by statutes, courts or legal
     documents for the protection of those on whose behalf a fiduciary acts.
     Examples of such fiduciaries include executors and administrators of
     estates, and guardians of minors and incompetents.

          Public Official bonds: required by statutes and ordinances to
     guarantee the lawful and faithful performance of the duties of office by
     public officials.

          International and Other: in 1997, CNA Surety expanded into the
     international surety and credit insurance market through a 50% U.S. dollar
     denominated quota share treaty with an affiliate of CCC, CNA Reinsurance
     Company, Limited (London) ("CNA Re"). In 2000, CNA Re made a mid-year
     decision to discontinue writing assumed international credit and surety
     business. Assumed international surety and credit business from CNA Re for
     the year ended December 31, 2000 decreased to $6.0 million from $11.3
     million in 1999.

          CNA Surety also writes direct contract and commercial surety bonds for
     international risks. Such bonds are written to satisfy the international
     bond requirements of our domestic customers and for foreign clients.

          In December 2000, CNA Surety purchased an equity interest in De
     Montfort Insurance Company PLC, a United Kingdom-based insurance company,
     which specializes in providing surety bonds and credit insurance. The
     investment in De Montfort further supports CNA Surety's international
     growth strategy by enhancing the company's international distribution
     capabilities in the European surety marketplace.

     In addition, the Company markets surety related products such as fidelity
bonds and errors and omissions ("E&O") insurance. Fidelity bonds cover losses
arising from employee dishonesty. Examples of purchasers of fidelity bonds are
law firms, insurance agencies and janitorial service companies. CNA Surety
writes E&O policies for three classes of insureds: notaries public, tax
preparers and insurance agents and brokers. The notary public E&O policy is
marketed as a companion product to the notary public bond and the tax preparer
E&O policy is marketed to small tax return preparation firms. The insurance
agents' and brokers' E&O insurance product is marketed directly to the Company's
independent agency force.

     Although all of its products are sold through the same independent
insurance agent and broker distribution network, the Company's underwriting and
management reporting are organized by the two broad types of surety products --
contract surety and commercial surety, which also includes fidelity bonds and
other insurance products for these purposes. These two operating segments have
been aggregated into one reportable business segment for financial reporting
purposes because of their similar economic and operating characteristics.

                                        5
<PAGE>   6

     The following tables set forth, for each principal class of bonds, gross
written premiums, net written premiums and number of domestic bonds and policies
in force and the respective percentages of the total for the past three years
(amounts in thousands, except average bond amounts):

<TABLE>
<CAPTION>
                                                               GROSS WRITTEN PREMIUMS
                                        ---------------------------------------------------------------------
                                                      % OF                     % OF                     % OF
                                          2000        TOTAL        1999        TOTAL        1998        TOTAL
                                          ----        -----        ----        -----        ----        -----
<S>                                     <C>           <C>        <C>           <C>        <C>           <C>
Contract..........................      $161,539       51.0%     $150,022       48.9%     $132,242       47.5%
Commercial:
  License and permit..............        79,114       25.0        80,413       26.2        66,394       23.9
  Judicial and fiduciary..........        25,669        8.1        29,485        9.6        26,557        9.5
  Public official.................        18,000        5.7        17,658        5.7        16,430        5.9
  International and other.........         5,773        1.8         2,946        1.0        11,665        4.2
                                        --------      -----      --------      -----      --------      -----
  Total commercial................       128,556       40.6       130,502       42.5       121,046       43.5
                                        --------      -----      --------      -----      --------      -----
Fidelity and other................        26,572        8.4        26,335        8.6        24,936        9.0
                                        --------      -----      --------      -----      --------      -----
                                        $316,667      100.0%     $306,859      100.0%     $278,224      100.0%
                                        ========      =====      ========      =====      ========      =====
Domestic..........................      $300,079       94.8%     $286,253       93.3%     $266,998       96.0%
International.....................        16,588        5.2        20,606        6.7        11,226        4.0
                                        --------      -----      --------      -----      --------      -----
                                        $316,667      100.0%     $306,859      100.0%     $278,224      100.0%
                                        ========      =====      ========      =====      ========      =====
</TABLE>

<TABLE>
<CAPTION>
                                                                NET WRITTEN PREMIUMS
                                        ---------------------------------------------------------------------
                                                      % OF                     % OF                     % OF
                                          2000        TOTAL        1999        TOTAL        1998        TOTAL
                                          ----        -----        ----        -----        ----        -----
<S>                                     <C>           <C>        <C>           <C>        <C>           <C>
Contract..........................      $150,504       49.4%     $145,616       48.7%     $127,114       47.0%
Commercial........................       126,923       41.7       128,834       43.1       120,638       44.6
Fidelity and other................        27,041        8.9        24,537        8.2        22,850        8.4
                                        --------      -----      --------      -----      --------      -----
                                        $304,468      100.0%     $298,987      100.0%     $270,602      100.0%
                                        ========      =====      ========      =====      ========      =====
Domestic..........................      $289,049       94.9%     $280,463       93.8%     $260,506       96.3%
International.....................        15,419        5.1        18,524        6.2        10,096        3.7
                                        --------      -----      --------      -----      --------      -----
                                        $304,468      100.0%     $298,987      100.0%     $270,602      100.0%
                                        ========      =====      ========      =====      ========      =====
</TABLE>

<TABLE>
<CAPTION>
                                                           DOMESTIC BOND/POLICIES IN FORCE
                                        ---------------------------------------------------------------------
                                                      % OF                     % OF                     % OF
                                          2000        TOTAL        1999        TOTAL        1998        TOTAL
                                          ----        -----        ----        -----        ----        -----
<S>                                     <C>           <C>        <C>           <C>        <C>           <C>
Contract..........................           217       10.2%          153        8.1%          200       11.1%
Commercial........................         1,498       70.2         1,368       72.2         1,276       70.7
Fidelity and other................           418       19.6           374       19.7           330       18.2
                                        --------      -----      --------      -----      --------      -----
                                           2,133      100.0%        1,895      100.0%        1,806      100.0%
                                        ========      =====      ========      =====      ========      =====
Average domestic bond
  penalty/policy limit(1).........      $ 31,190                 $ 32,224                 $ 29,377
                                        ========                 ========                 ========
</TABLE>

-------------------------
(1) The average bond penalty is a measure of the average limit of liability
    associated with in force contract and commercial surety bonds at each
    reporting period.

     In 2000, no individual agency generated more than 1.3% of aggregate gross
written premiums. Approximately $63.1 million, or 19.9%, of gross written
premiums were generated from national insurance brokers in 2000 with the single
largest national broker production comprising $22.8 million, or 7.2%, of gross
written premiums.

                                        6
<PAGE>   7

MARKETING

     The Company principally markets its products in all 50 states, as well as
the District of Columbia and Puerto Rico. Its products are marketed primarily
through independent producers, including multi-line agents and brokers such as
surety specialists, many of whom are members of the National Association of
Surety Bond Producers. CNA Surety enjoys broad national distribution of its
products, which are marketed through approximately 37,000 of the approximately
44,000 independent property and casualty insurance agencies in the United
States. In addition, the Company employs 59 full-time salaried marketing
representatives to continually service its vast producer network. Relationships
with these independent producers are maintained through the Company's 47 local
branch offices.

     The following table sets forth the distribution of the domestic business of
CNA Surety, by state based upon gross written premiums in each of the last three
years:

<TABLE>
<CAPTION>
                                                                  YEARS ENDED
                                                                 DECEMBER 31,
                                                          ---------------------------
                                                          2000       1999       1998
                                                          ----       ----       ----
<S>                                                       <C>        <C>        <C>
Gross Written Premiums by State:
  Texas...............................................     11.7%      12.6%      13.1%
  California..........................................      8.1        8.4        7.4
  Florida.............................................      6.0        5.6        5.5
  New York............................................      5.1        4.8        4.5
  Illinois............................................      4.3        4.5        4.9
  Georgia.............................................      3.7        3.0        3.1
  Pennsylvania........................................      3.5        3.5        3.8
  Massachusetts.......................................      3.0        3.0        2.7
  Michigan............................................      3.0        3.0        3.2
  All Other...........................................     51.6       51.6       51.8
                                                          -----      -----      -----
     Total............................................    100.0%     100.0%     100.0%
                                                          =====      =====      =====
</TABLE>

     Contract Surety

     With respect to standard contract surety, the core focus for the Company is
contractors with less than $50 million in contracted work in progress. This
segment is comprised of small contractors (less than $5 million in work in
progress), medium contractors ($5-$25 million) and the lower end of the large
contractors (greater than $25 million). These small and medium contractors, as a
group, represent a significant portion of the United States construction market.
The Company has a small number of accounts with contracted work in progress in
excess of $150 million, the majority of which have been clients of the Company
for more than ten years. Some of these accounts are maintained on a "co-surety"
or joint insurer basis with other sureties in order to manage aggregate
exposure.

     In addition to standard contract surety, the Company has underwriters that
focus on serving the bond requirements of small and emerging and specialty
contractors. These contractors typically have limited operating history,
financial resources or other special characteristics that require different
underwriting techniques than standard contract surety. For example, CNA Surety
participates in the non-standard contract surety market, through the federal
government's Small Business Administration ("SBA") surety bond guarantee
programs. These programs provide that the SBA assumes 70% -- 90% of the coverage
in exchange for 10% -- 30% of the premium.

     Commercial Surety

     A large portion of the commercial surety market is comprised of small
obligations represented by licenses and permits that are routine in nature and
require minimal underwriting. Customers are focused principally on prompt and
efficient service.

                                        7
<PAGE>   8

     The Company continues to focus its marketing efforts on this small
commercial bond market through its Sioux Falls service center. In this market
segment, CNA Surety emphasizes one-day response service, easy-to-use forms and
an extensive array of commercial bond products. In addition, independent agents
are provided pre-executed bond forms, powers of attorney, and facsimile
authorizations that allow them to issue many standard bonds in their offices.

     While a large portion of the commercial surety market is represented by
small entities, CNA Surety also seeks to service the bonding needs of middle
market and "Fortune 1000" firms, where a high level of technical and
underwriting skill is required. These larger customers are sophisticated,
professional buyers of commercial surety bonds who demand exceptional service
and business expertise at a reasonable cost. CNA Surety maintains a specific
underwriting staff in its Chicago home office and other underwriting centers
across the country dedicated to the middle market and "Fortune 1000" market.

     CNA Surety's insurance subsidiaries direct their marketing to particular
industries or classes of bonds on a broad basis. For instance, the Company
maintains programs directed at notary bonds, mortgage broker compliance bonds
and grain warehouse dealer bonds (protecting funds associated with grain
storage).

UNDERWRITING

     The underwriting philosophy of CNA Surety is disciplined, and focused on
consistent underwriting profitability. The extent and sophistication of
underwriting activity varies by type of risk. Contractor accounts and large
commercial surety customers undergo extensive credit, financial and managerial
review and analysis on a regular basis. Certain classifications of bonds, such
as fiduciary and court appeal bonds, also require more extensive underwriting.

     CNA Surety also targets various products in the surety and fidelity bond
market which are characterized by relatively low-risk exposure and small bond
amounts. The underwriting criteria, including the extent of bonding authority
granted to independent agents, varies depending on the class of business and the
type of bond. For example, relatively little underwriting information is
typically required of certain low-exposure risks such as notary bonds.

COMPETITION

     The surety and fidelity market is highly competitive. According to 1999
data from A.M. Best, the U.S. market aggregates approximately $4.1 billion in
direct written premiums, comprised of approximately $3.3 billion in surety
premiums and approximately $0.8 billion in fidelity premiums. The large
diversified insurance companies hold the largest market shares. For example, the
20 largest surety companies account for nearly 77% of the domestic surety market
and 89% of the domestic fidelity market. In 1999, CNA Surety was the second
largest surety provider with an 8.4% market share.

     Primary competitors of CNA Surety are approximately 20 national, multi-line
companies participating in the surety market throughout the country. Management
believes that its principal strengths are capacity, diverse product offerings,
service and accessibility and long-term relationships with agents and accounts.

     While the surety industry has experienced slow premium growth, competition
has increased as a result of ten years of profitable underwriting experience.
This competition has typically manifested itself through reduced premium rates
and greater tolerance for relaxation of underwriting standards. Management
believes such competition will continue.

REINSURANCE

     The Company's insurance subsidiaries, in the ordinary course of business,
cede reinsurance to other insurance companies to limit their exposure to loss.
Reinsurance arrangements are used to limit maximum loss, provide greater
diversification of risk and minimize exposure on larger risks. Reinsurance
contracts do not ordinarily relieve the Company of its primary obligations to
claimants. Therefore, a contingent liability exists with respect to reinsurance
ceded to the extent that any reinsurer is unable to meet the obligations assumed

                                        8
<PAGE>   9

under reinsurance contracts. The Company evaluates the financial condition of
its reinsurers, establishes allowances for uncollectible amounts and monitors
concentrations of credit risk.

     For contract and commercial surety business an excess of loss reinsurance
program is in effect. The Excess of Loss Contract provides the insurance
subsidiaries of CNA Surety with the capacity to underwrite large surety bond
exposures by providing reinsurance support from CCC. The Excess of Loss Contract
provides $75 million of coverage in excess of the $55 million of coverage
provided to the insurance subsidiaries by third party reinsurers, which is in
turn in excess of the $5 million of coverage per principal to be retained by the
CNA Surety insurance subsidiaries. Subsequent to the Merger Date, the Company
entered into a second excess of loss contract with CCC ("Second Excess of Loss
Contract"). The Second Excess of Loss Contract provides additional coverage for
principal losses that exceed the foregoing coverage of $75 million per principal
provided by the Excess of Loss Contract, or aggregate losses per principal in
excess of $135 million. The two Excess of Loss Contracts collectively provide
coverage for losses discovered on surety bonds in force as of the Merger Date
and for losses discovered on new and renewal business written during the term of
the Excess of Loss Contracts. CCC is also obligated to act as a joint insurer,
or "co-surety," for business covered by the Excess of Loss Contracts when
requested by the CNA Surety insurance subsidiaries. In consideration for the
reinsurance coverage provided by the Excess of Loss Contracts, the insurance
subsidiaries pay to CCC, on a quarterly basis, a premium equal to 1% of the net
written premiums applicable to the Excess of Loss Contract, subject to a minimum
premium of $20,000 and $5,000 per quarter under the Excess of Loss Contract and
Second Excess of Loss Contract, respectively. The CNA Surety insurance
subsidiaries paid $80,000 for all minimum quarterly premiums due for the Excess
of Loss Contract and $20,000 in minimum quarterly premiums for the Second Excess
of Loss Contract during the year ended December 31, 2000. There were no amounts
due to CCC under the Excess of Loss Contract and Second Excess of Loss Contract
as of December 31, 2000. Both Excess of Loss Contracts have been made effective
immediately following the Merger Date and continue for a period of five years
from the Merger Date.

     At December 31, 2000, CNA Surety's largest reinsurance receivable was
approximately $13.3 million with a company rated A++ (Superior) by A.M. Best.

RESERVES FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

     CNA Surety's insurance subsidiaries employ generally accepted reserving
approaches in establishing the estimated liability for unpaid losses and loss
adjustment expenses that give consideration to the inherent difficulty and
variability in the estimation process. In addition, CNA Surety utilizes an
independent actuarial firm of national standing to conduct periodic reviews of
loss reserving practices, and annually obtains actuarial certification as to the
reasonableness of actuarial assumptions used and the sufficiency of year-end
reserves for each of its principal insurance subsidiaries.

     The estimated liability for unpaid losses and loss adjustment expenses
includes, on an undiscounted basis, estimates of (a) the ultimate settlement
value of reported claims, (b) incurred but not reported ("IBNR") claims, (c)
future expenses to be incurred in the settlement of claims and (d) claim
recoveries, exclusive of reinsurance recoveries which are reported as an asset.
These estimates are determined based on the Company's and surety industry loss
experience as well as consideration of current trends and conditions. The
estimated liability for unpaid losses and loss adjustment expenses is an
estimate and there is the potential that actual future loss payments will differ
significantly from initial estimates. The methods of determining such estimates
and the resulting estimated liability are regularly reviewed and updated.
Changes in the estimated liability are reflected in operating income in the year
in which such changes are determined to be needed.

     A table is included in Note 8 to the Consolidated Financial Statements of
the 2000 Annual Report to Shareholders which presents the activity in the
reserves for unpaid losses and loss adjustment expenses for the Company and the
Predecessor. This table highlights the impact of revisions to the estimated
liability established in prior years.

     The following table sets forth a reconciliation of the consolidated loss
reserves reported in accordance with generally accepted accounting principles
("GAAP"), and the reserves reported to state insurance

                                        9
<PAGE>   10

regulatory authorities in accordance with statutory accounting principles
("SAP") for the year ended December 31, 2000 (dollars in thousands):

<TABLE>
<S>                                                             <C>
Net reserves at end of year, GAAP basis.....................    $134,298
Ceded reinsurance, net of salvage and subrogation...........      70,159
                                                                --------
Gross reserves at end of year, GAAP basis...................     204,457
Estimated salvage and subrogation recoverable (gross of
  reinsurance), not anticipated under SAP...................      18,153
Estimated reinsurance recoverable netted against gross
  reserves for SAP..........................................     (80,439)
                                                                --------
Gross reserves at end of year, SAP basis....................    $142,171
                                                                ========
</TABLE>

     The loss reserve development table below illustrates the change over time
of reserves established for the Company's estimated losses and loss adjustment
expenses at the end of various calendar years. The first section shows the
reserves as originally reported at the end of the stated year. The second
section shows the cumulative amounts paid as of the end of successive years with
respect to that reserve liability. The third section shows re-estimates of the
original recorded reserve as of the end of each successive year which is the
result of management's expanded awareness of additional facts and circumstances
that pertain to the unsettled claims. The last section compares the latest
re-estimated reserve to the reserve originally established, and indicates
whether or not the original reserve was adequate or inadequate to cover the
estimated costs of unsettled claims.

                                        10
<PAGE>   11

     The loss reserve development table is cumulative as of each December 31,
and, therefore, ending balances should not be added since the amount at the end
of each calendar year includes activity for both the current and prior years.
The loss reserve development table reflects, on a pro forma basis, the reserves
of the CCC Surety Operations and Capsure since 1990 and CIC since its
acquisition in May of 1995. Such historical development is not necessarily
indicative of the financial results that would have occurred under the ownership
and management of CNA Surety nor of future operating results.
<TABLE>
<CAPTION>
                                                      AS OF DECEMBER 31,
                       --------------------------------------------------------------------------------
                        1990      1991      1992      1993      1994       1995       1996       1997
                        ----      ----      ----      ----      ----       ----       ----       ----
                                                    (DOLLARS IN THOUSANDS)
<S>                    <C>       <C>       <C>       <C>       <C>       <C>        <C>        <C>
Net reserves for
  losses and loss
  adjustment
  expenses...........  $69,733   $60,425   $61,998   $64,627   $70,398   $147,911   $137,064   $122,725
Net Paid (Cumulative)
  as of:
  One year later.....   13,456    16,287    17,636    12,923    12,018     42,552      9,866     19,595
  Two years later....   22,330    24,295    25,854    19,671    18,149     43,179     20,171     30,775
  Three years
    later............   26,835    29,857    29,495    21,990    21,229     46,782     25,206     43,999
  Four years later...   31,591    31,273    30,582    23,070    22,313     48,960     32,918         --
  Five years later...   32,133    31,909    30,817    23,864    24,776     56,891         --         --
  Six years later....   32,352    32,354    32,150    24,706    24,102         --         --         --
  Seven years
    later............   32,993    32,419    32,811    23,180        --         --         --         --
  Eight years
    later............   33,033    34,344    31,126        --        --         --         --         --
  Nine years later...   34,805    32,456        --        --        --         --         --         --
  Ten years later....   32,610        --        --        --        --         --         --         --
Net Reserves
  Re-estimated as of:
  End of initial
    year.............   69,733    60,425    61,998    64,627    70,398    147,911    137,064    122,725
  One year later.....   50,822    58,644    58,603    54,568    51,471    132,267     96,178    118,373
  Two years later....   51,330    51,511    54,585    44,749    44,135    103,466     90,796    102,304
  Three years
    later............   46,439    46,826    47,911    38,972    38,829    101,745     77,086     87,321
  Four years later...   42,946    42,212    42,542    28,094    38,628     89,348     62,217         --
  Five years later...   40,747    39,945    33,699    30,335    31,362     77,477         --         --
  Six years later....   38,131    36,164    37,188    27,842    27,327         --         --         --
  Seven years
    later............   36,179    37,695    34,966    26,010        --         --         --         --
  Eight years
    later............   37,853    37,014    31,672        --        --         --         --         --
  Nine years later...   37,252    33,749        --        --        --         --         --         --
  Ten years later....   33,941        --        --        --        --         --         --         --
                       =======   =======   =======   =======   =======   ========   ========   ========
Total net
  (deficiency)
  redundancy.........  $35,792   $26,676   $30,326   $38,617   $43,071   $ 70,434   $ 74,847   $ 35,404
                       =======   =======   =======   =======   =======   ========   ========   ========
Cumulative redundancy
  (deficiency) as a
  percentage of
  original
  estimate...........     51.3%     44.1%     48.9%     59.8%     61.2%      47.6%      54.6%      28.8%
                       =======   =======   =======   =======   =======   ========   ========   ========

<CAPTION>
                             AS OF DECEMBER 31,
                       ------------------------------
                         1998       1999       2000
                         ----       ----       ----
                           (DOLLARS IN THOUSANDS)
<S>                    <C>        <C>        <C>
Net reserves for
  losses and loss
  adjustment
  expenses...........  $142,034   $137,469   $134,298
Net Paid (Cumulative)
  as of:
  One year later.....    32,428     35,825         --
  Two years later....    52,524         --         --
  Three years
    later............        --         --         --
  Four years later...        --         --         --
  Five years later...        --         --         --
  Six years later....        --         --         --
  Seven years
    later............        --         --         --
  Eight years
    later............        --         --         --
  Nine years later...        --         --         --
  Ten years later....        --         --         --
Net Reserves
  Re-estimated as of:
  End of initial
    year.............   142,034    137,469    134,298
  One year later.....   128,949    130,376         --
  Two years later....   114,605         --         --
  Three years
    later............        --         --         --
  Four years later...        --         --         --
  Five years later...        --         --         --
  Six years later....        --         --         --
  Seven years
    later............        --         --         --
  Eight years
    later............        --         --         --
  Nine years later...        --         --         --
  Ten years later....        --         --         --
                       ========   ========   ========
Total net
  (deficiency)
  redundancy.........  $ 27,429   $  7,093   $     --
                       ========   ========   ========
Cumulative redundancy
  (deficiency) as a
  percentage of
  original
  estimate...........      19.3%       5.2%        --
                       ========   ========   ========
</TABLE>

CLAIMS

     Proactive claims management is an important factor for the profitable
underwriting of surety and fidelity products. The Company maintains an
experienced and dedicated staff of in-house claim specialists. Claim handling is
performed in two locations -- Chicago and Sioux Falls. The disposition of claims
and other claim-related activity is done in accordance with established
policies, procedures and expense controls designed to minimize loss costs and
maximize salvage and subrogation recoveries. Indemnity and subrogation rights
exist on a significant portion of the business written, enabling the Company to
pursue loss recovery from the principal.

ASBESTOS AND ENVIRONMENTAL CLAIMS

     The Company does not typically bond contractors that specialize in
hazardous environmental remediation work. The Company does however bond several
accounts that have incidental environmental exposure with
                                        11
<PAGE>   12

respect to which the Company provides bonding programs. In the commercial surety
market, the Company provides bonds to large corporations that are in the
business of mining various minerals and are obligated to post reclamation bonds
that guarantee that property which was disturbed during mining is returned to an
acceptable condition when the mining is completed. The company also provides
court and other surety bonds for large corporations wherein the underlying
action involves environmental related issues. While no environmental
responsibility is overtly provided by commercial or contract bonds, some risk of
environmental exposure may exist if the surety were to assume certain rights in
the completion of a defaulted project or through salvage recovery.

     Any claim notices that are received are reported and handled in the regular
course of claim handling. The company estimates its net case incurred losses on
known claims of this nature to be $9.1 million as of December 31, 2000.

REGULATION

     The Company's insurance subsidiaries are subject to varying degrees of
regulation and supervision in the jurisdictions in which they transact business
under statutes which delegate regulatory, supervisory and administrative powers
to state insurance regulators. In general, an insurer's state of domicile has
principal responsibility for such regulation which is designed generally to
protect policyholders rather than investors and relates to matters such as the
standards of solvency which must be maintained; the licensing of insurers and
their agents; the examination of the affairs of insurance companies, including
periodic financial and market conduct examinations; the filing of annual and
other reports, prepared on a statutory basis, on the financial condition of
insurers or for other purposes; establishment and maintenance of reserves for
unearned premiums and losses; and requirements regarding numerous other matters.
Licensed or admitted insurers generally must file with the insurance regulators
of such states, or have filed on its behalf, the premium rates and bond and
policy forms used within each state. In some states, approval of such rates and
forms must be received from the insurance regulators in advance of their use.

     Western Surety is domiciled in South Dakota and licensed in all 50 states
and the District of Columbia. SBCA is domiciled in South Dakota and licensed in
25 states and the District of Columbia. USA is domiciled in Texas and licensed
in 44 states and the District of Columbia.

     Insurance regulations generally also require registration and periodic
disclosure of certain information concerning ownership, financial condition,
capital structure, general business operations and any material transactions or
agreements by or among affiliates. Such regulation also typically restricts the
ability of any one person to acquire 10% or more, either directly or indirectly,
of a company's stock without prior approval of the applicable insurance
regulatory authority. In addition, dividends and other distributions to
stockholders generally may be paid only out of unreserved and unrestricted
statutory earned surplus. Such distributions may be subject to prior regulatory
approval, including a review of the implications on Risk-Based Capital
requirements. A discussion of Risk-Based Capital requirements for property and
casualty insurance companies is included in both Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 14 to the
Consolidated Financial Statements of the 2000 Annual Report to Shareholders.
Without prior regulatory approval in 2001, CNA Surety's insurance subsidiaries
may pay stockholder dividends of $60.2 million in the aggregate. For the year
ended December 31, 2000, CNA Surety received $56.5 million in dividends from its
insurance subsidiaries.

     In March of 1998, the National Association of Insurance Commissioners
("NAIC") adopted the Codification of Statutory Accounting Principles
("Codifiction"). Codification, which intended to standardize regulatory
accounting and reporting to state insurance departments, is effective January 1,
2001.

     However, statutory accounting principles will continue to be established by
individual state laws and permitted practices. The states in which CNA Surety's
insurance subsidiaries conduct business will require adoption of Codification
for the preparation of statutory financial statements effective January 1, 2001.
The Company estimates that the adoption of Codification will increase statutory
capital and surplus as of January 1, 2001 by approximately $21.9 million.

                                        12
<PAGE>   13

     CNA Surety's insurance subsidiaries are subject to periodic financial and
market conduct examinations. These examinations are generally performed by the
domiciliary state insurance regulatory authorities. The South Dakota Department
of Commerce and Regulation -- Division of Insurance (the "South Dakota
Department") conducted its financial and market conduct examination of Western
Surety for the five year period ended December 31, 1996. The South Dakota
Department made a finding of non-compliance with respect to the Company's
practices regarding return of premiums and recommended that Western Surety
change its current procedures regarding the return of premiums. The regulation
in question was subsequently amended to exclude surety products which eliminated
any non-compliance by the Company. The Texas Department of Insurance conducted
its last examination of USA's financial matters as of December 31, 1996. There
were no significant issues noted which required corrective action by any of the
insurance subsidiaries.

     Certain states in which CNA Surety's insurance subsidiaries conduct their
business require insurers to join a guaranty association. Guaranty associations
provide protection to policyholders of insurers licensed in such states against
the insolvency of those insurers. In order to provide the associations with
funds to pay certain claims under policies issued by insolvent insurers, the
guaranty associations charge members assessments based on the amount of direct
premiums written in that state. Such assessments were not material to CNA
Surety's results of operations in 2000.

     Western Surety and USA each qualifies as an acceptable surety for federal
and other public works project bonds pursuant to U.S. Department of Treasury
regulations. The underwriting limitations of Western Surety and USA, based on
each insurer's statutory surplus, are currently $17.3 million and $1.6 million,
respectively. Through intercompany reinsurance and related agreements with CCC,
CNA Surety has access to CCC's $588.1 million U.S. Department of Treasury
underwriting limitation.

INVESTMENTS

     Insurance company investment practices must comply with insurance laws and
regulations and must also comply with certain covenants under CNA Surety's $130
million revolving credit facility. Generally, insurance laws and regulations
prescribe the nature and quality of, and set limits on, the various types of
investments which may be made by CNA Surety's insurance subsidiaries.

     The Company's investment portfolio generally is managed to maximize
after-tax investment return, while minimizing credit risk with investments
concentrated in high quality income securities. CNA Surety's portfolio is
managed to provide diversification by limiting exposures to any one industry,
issue or issuer, and to provide liquidity by investing in the public securities
markets. The portfolio is structured to support CNA Surety's insurance
underwriting operations and to consider the expected duration of liabilities and
short-term cash needs.

     An investment committee of CNA Surety's Board of Directors establishes
investment policy and oversees the management of each portfolio. A professional
independent investment adviser has been engaged to assist in the management of
each insurance subsidiary investment portfolio pursuant to established
investment committee guidelines. The insurance subsidiaries pay an advisory fee
based on the market value of the assets under management.

EMPLOYEES

     As of December 31, 2000, the Company employed 817 persons. CNA Surety has
not experienced any work stoppages. Management of CNA Surety believes its
relations with its employees are good.

ITEM 2. PROPERTIES

     CNA Surety leases its executive offices and its shared branch locations
with CCC under an Administrative Services Agreement. CNA Surety currently uses
approximately 116,000 square feet and related personal property at 39 branch
locations and its home and executive offices (24,800 square feet), in Chicago,
Illinois. CNA Surety's annual rent for this space is approximately $2.3 million.
CNA Surety may terminate its use of

                                        13
<PAGE>   14

these locations as set forth in the Administrative Services Agreement, without
penalty, by providing CCC with 30 days written notice.

     CNA Surety leases office space for its primary processing and service
center at 101 South Phillips Avenue, Sioux Falls, South Dakota, under a lease
expiring in 2012. CNA Surety's office space, consisting of approximately 82,900
square feet, is leased from a partnership in which the Company owns a 50%
interest. The annual rent, which is subject to annual adjustments, was $1.5
million as of December 31, 2000. CNA Surety also leases space for large contract
and commercial branch offices in Dallas, Texas and New York, New York. Annual
rent for these offices was $0.3 million with leases terminating in 2004 and
2007, respectively. CNA Surety leases office space for its small and specialty
contract home office at 950 Echo Lane, Suite 250, Houston, Texas, under a lease
terminating in 2001 with an annual rent of $0.3 million. The Company also leases
space for one small and specialty contract branch office for an additional
annual rent of approximately $0.1 million.

ITEM 3. LEGAL PROCEEDINGS

     The Company and its subsidiaries are parties to various lawsuits arising in
the normal course of business, some seeking material damages. The Company
believes the resolution of these lawsuits will not have a material adverse
effect on its financial condition or its results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     The Company's common stock ("Common Stock") trades on the New York Stock
Exchange under the symbol SUR. On March 9, 2001, the last reported sale price
for the Common Stock was $12.97 per share. The following table shows the range
of high and low sales prices for shares of the Common Stock as reported on the
New York Stock Exchange during 2000 and 1999.

<TABLE>
<CAPTION>
                                                                 HIGH      LOW
                                                                 ----      ---
<S>                                                             <C>       <C>
2000
1st Quarter.................................................    $14.50    $10.50
2nd Quarter.................................................    $14.94    $10.75
3rd Quarter.................................................    $12.25    $10.38
4th Quarter.................................................    $14.50    $11.00
1999
1st Quarter.................................................    $16.00    $10.19
2nd Quarter.................................................    $15.56    $12.31
3rd Quarter.................................................    $15.50    $12.13
4th Quarter.................................................    $13.00    $ 9.75
</TABLE>

     The number of stockholders of record of Common Stock on March 9, 2001, was
approximately 944.

DIVIDENDS

     Effective March 6, 2001, the Company's quarterly dividend rate was raised
to 9 cents per share or 36 cents on an annual basis. The declaration and payment
of dividends to holders of Common Stock, including the amount and frequency of
such dividends, is at the discretion of the Board and depends upon many factors,
including CNA Surety's financial condition, operating characteristics, projected
earnings and growth, capital

                                        14
<PAGE>   15
requirements of its insurance subsidiaries, debt service obligations and such
other factors as the Board deems relevant.

ITEM 6. SELECTED FINANCIAL DATA

     The following financial information has been derived from the Consolidated
Financial Statements and Notes thereto which appear in the 2000 Annual Report to
Shareholders and are incorporated herein by reference.

     CNA Surety Corporation is a holding company for the combined surety
business of CNAF and Capsure. Pursuant to a reorganization agreement, CNAF and
Capsure merged their respective operations at the close of business on September
30, 1997. The surety operations of CNAF are referred to as CCC Surety Operations
("Predecessor"). For a more detailed description of the merger transactions and
their effects on the Company's financial data, see the Consolidated Financial
Statements and related Notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing in the 2000 Annual
Report to Shareholders which are incorporated herein by reference.

     The following information presented for CNA Surety is for the years ended
December 31, 2000, 1999 and 1998 and the period from September 30, 1997 (date of
inception) through December 31, 1997 and as of December 31, 2000, 1999, 1998 and
1997. Selected financial data of the Predecessor is presented on the following
page.

<TABLE>
<CAPTION>
                                                          2000         1999         1998         1997
                                                          ----         ----         ----         ----
                                                         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>          <C>          <C>          <C>
Total revenues(1)...................................    $332,273     $309,405     $283,840     $ 71,284
                                                        ========     ========     ========     ========
Gross written premiums..............................    $316,667     $306,859     $278,224     $ 72,755
                                                        ========     ========     ========     ========
Net written premiums................................    $304,468     $298,987     $270,602     $ 73,989
                                                        ========     ========     ========     ========
Net earned premiums.................................    $301,819     $283,540     $258,737     $ 65,433
                                                        ========     ========     ========     ========
Underwriting income(2)..............................    $ 64,481     $ 71,894     $ 61,773     $ 15,086
Net investment income...............................      29,897       25,850       24,259        5,766
Net realized investment gains.......................         557           15          844           85
Interest expense....................................       6,956        5,846        7,218        1,831
Non-recurring charges...............................         500           --           --           --
Amortization of intangible assets...................       6,097        5,982        5,900        1,447
                                                        --------     --------     --------     --------
Income before income taxes..........................      81,382       85,931       73,758       17,659
Income taxes........................................      27,780       29,433       28,243        6,663
                                                        --------     --------     --------     --------
Net income..........................................    $ 53,602     $ 56,498     $ 45,515     $ 10,996
                                                        ========     ========     ========     ========
Basic and diluted earnings per common share.........    $   1.25     $   1.28     $   1.04     $   0.25
                                                        ========     ========     ========     ========
Loss ratio(2).......................................        18.4%        15.7%        17.4%        18.5%
Expense ratio.......................................        60.2         58.9         58.7         58.4
                                                        --------     --------     --------     --------
Combined ratio(2)...................................        78.6%        74.6%        76.1%        76.9%
                                                        ========     ========     ========     ========
Invested assets and cash............................    $555,975     $499,400     $505,355     $419,667
Intangible assets, net of amortization..............     149,882      155,980      156,062      161,962
Total assets........................................     950,568      851,575      819,370      725,131
Insurance reserves..................................     406,636      357,233      333,728      302,168
Debt................................................     101,556      101,900      113,000      118,000
Total liabilities...................................     576,536      525,271      509,473      468,399
Stockholders' equity................................     374,032      326,304      309,897      256,732
Book value per share................................    $   8.76     $   7.59     $   7.03     $   5.93
Dividends paid per share............................    $   0.32     $   0.32     $   0.08     $     --
</TABLE>

-------------------------
(1) Includes investment income and investment gains for CNA Surety for the year
    ended December 31, 2000, 1999 and 1998 and for the period from
    September 30, 1997 (date of inception) through December 31, 1997.

                                        15
<PAGE>   16

(2) Includes the effect of recording revisions of prior year reserves. The
    dollar amount and the percentage point effect on the loss ratio of these
    reserve revisions, all of which were favorable, were $7,093, or 2.4%, for
    the year ended December 31, 2000, $13,085, or 4.6%, for the year ended
    December 31, 1999 and $4,352, or 1.7%, for the year ended December 31, 1998
    and $647, or 1.0%, for the period from September 30, 1997 (date of
    inception) through December 31, 1997.

     The following information of the Predecessor is presented for the three
months ended December 31, 1996, for the nine months ended September 30, 1997 and
1996 and for the year ended December 31, 1996. The selected financial
information of the Predecessor does not include data with respect to assets,
liabilities (other than insurance reserves) and equity because CNAF did not
customarily allocate the investment portfolio or equity of its operating
subsidiaries to its business units like CCC Surety Operations.

<TABLE>
<CAPTION>
                                                       THREE       NINE MONTHS ENDED          YEAR
                                                       MONTHS        SEPTEMBER 30,           ENDED
                                                       ENDED      --------------------    DECEMBER 31,
                                                      12/31/96      1997        1996          1996
                                                      --------      ----        ----      ------------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                   <C>         <C>         <C>         <C>
Gross written premiums............................    $ 40,654    $116,075    $114,554      $155,208
                                                      ========    ========    ========      ========
Net written premiums..............................    $ 37,641    $108,630    $106,263      $143,904
                                                      ========    ========    ========      ========
Net earned premiums...............................    $ 36,767    $108,564    $112,302      $149,069
Net loss and LAE(1)...............................       9,394     (11,516)     23,612        33,006
Amortization of deferred policy acquisition
  costs(2)........................................      16,665      48,075      49,717        66,382
Other direct expenses.............................       4,631      10,173       8,637        13,268
Policyholders' dividends..........................         324       1,426       1,641         1,965
                                                      --------    --------    --------      --------
Excess of net earned premiums over direct
  operating expenses before income taxes(1)(2)....    $  5,753    $ 60,406    $ 28,695      $ 34,448
                                                      ========    ========    ========      ========
Loss ratio(1).....................................        25.6%      (10.6)%      21.0%         22.1%
Expense ratio(2)..................................        58.8        55.0        53.4          54.8
                                                      --------    --------    --------      --------
Combined ratio(1)(2)..............................        84.4%       44.4%       74.4%         76.9%
                                                      ========    ========    ========      ========
Insurance reserves(3).............................    $214,828    $183,491    $210,340      $214,828
</TABLE>

-------------------------
(1) Includes the effect of recording releases of prior year loss reserves. The
    dollar amount and the percentage point effect on the loss ratio of these
    reserve revisions, all of which were net reductions, were $1,232, or 3.4%,
    for the three months ended December 31, 1996, $35,000, or 32.2%, and $8,510,
    or 7.6%, for the nine months ended September 30, 1997 and 1996,
    respectively, and $9,742, or 6.5%, for the year ended December 31, 1996.

(2) Does not include the effects of certain general and administrative expenses,
    which are indirect or overhead in nature, since such costs were not
    historically allocated to the CCC Surety Operations by CNAF or its
    subsidiaries. Accordingly, the comparability of this data to other data that
    include such costs is affected.

(3) The insurance reserves include both loss and loss adjustment expense and
    unearned premium reserves. These reserves are shown before the effects of
    ceded reinsurance. In accordance with the reorganization and related
    reinsurance agreements, these reserves, as of the Merger Date, were
    transferred to Western Surety, net of reinsurance which totaled $9,979 and
    $23,876 for the nine months ended September 30, 1997 and 1996 and $21,779 at
    December 31, 1996.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     Incorporated herein by reference from pages 14 through 26 of the 2000
Annual Report to Shareholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK

     Incorporated herein by reference from pages 21 through 24 of the 2000
Annual Report to Shareholders.

                                        16
<PAGE>   17

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL:

Consolidated Balance Sheets as of December 31, 2000 and 1999

Consolidated Statements of Income for the Years Ended December 31, 2000, 1999
     and 1998

Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
     2000, 1999 and 1998

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
     1999 and 1998

Notes to Consolidated Financial Statements

Independent Auditors' Report

     The above Consolidated Financial Statements, the related Notes to the
Consolidated Financial Statements and the Independent Auditors' Report are
incorporated herein by reference from pages 27 through 46 of the 2000 Annual
Report to Shareholders.

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
FINANCIAL STATEMENT SCHEDULES:
Schedule I -- Summary of Investments........................    20
Schedule II -- Condensed Financial Information of
  Registrant................................................    21
Schedule III -- Supplementary Insurance Information.........    24
Schedule IV -- Reinsurance..................................    25
Schedule V -- Valuation and Qualifying Accounts.............    26
Schedule VI -- Supplemental Information Concerning
  Property -- Casualty Insurance Operations.................    27
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                        17
<PAGE>   18

                                    PART III

ITEMS 10, 11, 12, AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
                          EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
                          BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
                          RELATIONSHIPS AND RELATED TRANSACTIONS

     The Company will file a definitive proxy statement with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act
of 1934 (the "Proxy Statement") relating to the Company's Annual Meeting of
Stockholders to be held on May 15, 2001, not later than 120 days after the end
of the fiscal year covered by this Form 10-K. Information required by Items 10
through 13 will appear in the Proxy Statement and is incorporated herein by
reference.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                             <C>
     (a)(1) Financial Statements:
             A separate index to the Consolidated Financial
             Statements is presented in Part II, Item 8.....      17

     (a)(2) Financial Statement Schedules:
             Independent Auditors' Report...................      19
             Schedule I -- Summary of Investments...........      20
             Schedule II -- Condensed Financial Information
             of Registrant..................................      21
             Schedule III -- Supplementary Insurance
             Information....................................      24
             Schedule IV -- Reinsurance.....................      25
             Schedule V -- Valuation and Qualifying
             Accounts.......................................      26
             Schedule VI -- Supplemental Information
             Concerning Property -- Casualty Insurance
             Operations.....................................      27

     (a)(3) Exhibits........................................      28

     (b) Reports on Form 8-K:
</TABLE>

     November 13, 2000: CNA Surety reports third quarter 2000 results.

                                        18
<PAGE>   19

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
CNA Surety Corporation

     We have audited the consolidated financial statements of CNA Surety
Corporation as of December 31, 2000 and 1999, and for each of the three years in
the period ended December 31, 2000 and have issued our report thereon dated
February 12, 2001; such financial statements and report are included in your
2000 Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedules listed in Item 14. These
financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly, in
all material respects the information set forth therein.

Deloitte & Touche LLP
Chicago, Illinois
February 12, 2001

                                        19
<PAGE>   20

                                                                      SCHEDULE I

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                             SUMMARY OF INVESTMENTS
                   OTHER THAN INVESTMENTS IN RELATED PARTIES

<TABLE>
<CAPTION>
                                                                     AS OF DECEMBER 31, 2000
                                                                ---------------------------------
                                                                 COST OR
                                                                AMORTIZED      FAIR      CARRYING
                                                                  COST        VALUE       VALUE
                                                                ---------     -----      --------
                                                                     (AMOUNTS IN THOUSANDS)
<S>                                                             <C>          <C>         <C>
Fixed Income Securities:
  U.S. Government and government agencies and authorities...    $115,639     $117,485    $117,485
  States, municipalities and political subdivisions.........     208,423      212,630     212,630
  All other corporate bonds.................................     129,508      128,169     128,169
                                                                --------     --------    --------
       Total fixed income securities........................     453,570     $458,284     458,284
                                                                --------     ========    --------
Equity securities...........................................      37,761       33,927      33,927
Short-term investments......................................      52,660                   52,660
Other investments...........................................       5,623                    5,154
                                                                --------                 --------
       Total investments....................................    $549,614                 $550,025
                                                                ========                 ========
</TABLE>

<TABLE>
<CAPTION>
                                                                     AS OF DECEMBER 31, 1999
                                                                ---------------------------------
                                                                 COST OR
                                                                AMORTIZED      FAIR      CARRYING
                                                                  COST        VALUE       VALUE
                                                                ---------     -----      --------
                                                                     (AMOUNTS IN THOUSANDS)
<S>                                                             <C>          <C>         <C>
Fixed Income Securities:
  U.S. Government and government agencies and authorities...    $116,185     $112,739    $112,739
  States, municipalities and political subdivisions.........     229,499      218,153     218,153
  All other corporate bonds.................................      91,006       87,064      87,064
                                                                --------     --------    --------
       Total fixed income securities........................     436,690     $417,956     417,956
                                                                --------     ========    --------
Equity securities...........................................      23,968       25,897      25,897
Short-term investments......................................      43,033                   43,033
Other investments...........................................       5,626                    5,277
                                                                --------                 --------
       Total investments....................................    $509,317                 $492,163
                                                                ========                 ========
</TABLE>

                                        20
<PAGE>   21

                                                                     SCHEDULE II

                             CNA SURETY CORPORATION

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                ----------------------
                                                                  2000         1999
                                                                  ----         ----
                                                                (AMOUNTS IN THOUSANDS)
<S>                                                             <C>          <C>
ASSETS
Investments in and advances to subsidiaries.................    $439,636     $428,232
Fixed income securities.....................................       5,051           --
Short-term investments......................................      43,984       11,618
Cash........................................................       1,965        1,437
Other assets................................................       1,440        1,543
                                                                --------     --------
     Total assets...........................................    $492,076     $442,830
                                                                ========     ========
LIABILITIES
Debt........................................................    $100,000     $100,000
Other liabilities...........................................      18,044       16,526
                                                                --------     --------
     Total liabilities......................................     118,044      116,526
                                                                --------     --------
STOCKHOLDERS' EQUITY
Common stock................................................         441          441
Additional paid-in capital..................................     253,497      253,366
Retained earnings...........................................     135,308       95,419
Accumulated other comprehensive income (loss)...............         267      (11,150)
Treasury stock, at cost.....................................     (15,481)     (11,772)
                                                                --------     --------
     Total stockholders' equity.............................     374,032      326,304
                                                                --------     --------
          Total liabilities and stockholders' equity........    $492,076     $442,830
                                                                ========     ========
</TABLE>

                                        21
<PAGE>   22

                                                                     SCHEDULE II

                             CNA SURETY CORPORATION

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                        (PARENT COMPANY) -- (CONTINUED)
                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                             YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                            DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                2000            1999            1998
                                                            ------------    ------------    ------------
                                                                       (AMOUNTS IN THOUSANDS)
<S>                                                         <C>             <C>             <C>
Revenues:
  Net investment income.................................      $ 2,046         $   787         $   695
                                                              -------         -------         -------
     Total revenues.....................................        2,046             787             695
                                                              -------         -------         -------
Expenses:
  Interest expense......................................        6,869           5,806           7,218
  Corporate expense.....................................        3,489           4,100           3,062
                                                              -------         -------         -------
     Total expenses.....................................       10,358           9,906          10,280
                                                              -------         -------         -------
Loss from operations before income taxes and equity in
  net income of subsidiaries............................       (8,312)         (9,119)         (9,585)
Income taxes............................................       (3,359)         (2,892)         (3,399)
                                                              -------         -------         -------
Net loss before equity in net income of
  subsidiaries -- Parent Company only...................       (4,953)         (6,227)         (6,186)
Equity in net income of subsidiaries....................       58,555          62,725          51,701
                                                              -------         -------         -------
Net income..............................................      $53,602         $56,498         $45,515
                                                              =======         =======         =======
</TABLE>

                                        22
<PAGE>   23

                                                                     SCHEDULE II

                             CNA SURETY CORPORATION

                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                        (PARENT COMPANY) -- (CONTINUED)
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                            DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                2000            1999            1998
                                                            ------------    ------------    ------------
                                                                       (AMOUNTS IN THOUSANDS)
<S>                                                         <C>             <C>             <C>
OPERATING ACTIVITIES:
  Net income............................................      $ 53,602        $ 56,498        $ 45,515
     Cash dividends from subsidiaries...................        56,450          33,300           6,610
     Tax payments received from subsidiaries............        29,062          28,674          28,499
     Federal and state income tax payments..............       (24,050)        (20,600)        (17,750)
     Adjustments to reconcile net income to net cash
       provided by operating activities:
       Equity in income of unconsolidated affiliates....       (58,555)        (62,725)        (51,701)
       Change in other assets and liabilities...........        (3,367)         (5,746)            749
                                                              --------        --------        --------
Net cash provided by operating activities...............        53,142          29,401          11,922
                                                              --------        --------        --------
INVESTING ACTIVITIES:
  Net advances from (to) subsidiaries...................         2,145          (3,519)         11,935
  Capital contributions to subsidiaries.................            --          (4,500)             --
  Purchases of fixed income securities..................        (5,051)             --              --
  Changes in short-term investments.....................       (32,366)          2,874          (7,471)
  Other.................................................           (24)             --              --
                                                              --------        --------        --------
Net cash (used in) provided by investing activities.....       (35,296)         (5,145)          4,464
                                                              --------        --------        --------
FINANCING ACTIVITIES:
  Proceeds from debt....................................            --              --              --
  Principal payments on debt............................            --         (13,000)         (5,000)
  Proceeds from issuance of common stock................            --              --           7,531
  Dividends to stockholders.............................       (13,713)        (14,063)         (3,527)
  Purchase of treasury stock............................        (3,709)        (11,772)             --
  Other.................................................           104              97             503
                                                              --------        --------        --------
Net cash used in financing activities...................       (17,318)        (38,738)           (493)
                                                              --------        --------        --------
Increase (decrease) in cash.............................           528         (14,482)         15,893
Cash at beginning of period.............................         1,437          15,919              26
                                                              --------        --------        --------
Cash at end of period...................................      $  1,965        $  1,437        $ 15,919
                                                              ========        ========        ========
</TABLE>

                                        23
<PAGE>   24

                                                                    SCHEDULE III

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                      SUPPLEMENTARY INSURANCE INFORMATION
              CNA SURETY CORPORATION AS OF AND FOR THE YEARS ENDED
                        DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                             YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                            DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                                2000            1999            1998
                                                            ------------    ------------    ------------
                                                                       (AMOUNTS IN THOUSANDS)
<S>                                                         <C>             <C>             <C>
Deferred policy acquisition costs.......................      $ 91,403        $ 84,924        $ 74,488
                                                              ========        ========        ========
Future policy benefits, losses, claims and loss expense
  reserves..............................................      $204,457        $157,933        $150,020
                                                              ========        ========        ========
Unearned premiums.......................................      $202,179        $199,300        $183,708
                                                              ========        ========        ========
Other policy claims and benefits payable................      $     --        $     --        $     --
                                                              ========        ========        ========
Net premium revenue.....................................      $301,819        $283,540        $258,737
                                                              ========        ========        ========
Net investment income...................................      $ 29,897        $ 25,850        $ 24,259
                                                              ========        ========        ========
Benefits, claims, losses and settlement expenses........      $ 55,683        $ 44,672        $ 44,998
                                                              ========        ========        ========
Amortization of deferred policy acquisition costs.......      $133,635        $119,746        $105,420
                                                              ========        ========        ========
Other operating expenses................................      $ 48,020        $ 47,228        $ 46,546
                                                              ========        ========        ========
Net premiums written....................................      $304,468        $298,987        $270,602
                                                              ========        ========        ========
</TABLE>

                                        24
<PAGE>   25

                                                                     SCHEDULE IV

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                                  REINSURANCE
  CNA SURETY CORPORATION FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                                          CEDED TO      ASSUMED                  OF AMOUNT
                                               GROSS        OTHER      FROM OTHER      NET        ASSUMED
                                               AMOUNT     COMPANIES    COMPANIES      AMOUNT       TO NET
                                               ------     ---------    ----------     ------     ----------
                                                                 (AMOUNTS IN THOUSANDS)
<S>                                           <C>         <C>          <C>           <C>         <C>
CNA SURETY CORPORATION
--------------------------
YEAR ENDED DECEMBER 31, 2000
Premiums written:
  Property and casualty insurance.........    $115,100     $12,199      $201,567     $304,468       66.2%
                                              --------     -------      --------     --------       ----
     Total premiums written...............    $115,100     $12,199      $201,567     $304,468       66.2%
                                              ========     =======      ========     ========       ====
Premiums earned:
  Property and casualty insurance.........    $109,472     $14,831      $207,178     $301,819       68.6%
                                              --------     -------      --------     --------       ----
     Total premiums earned................    $109,472     $14,831      $207,178     $301,819       68.6%
                                              ========     =======      ========     ========       ====
YEAR ENDED DECEMBER 31, 1999
Premiums written:
  Property and casualty insurance.........    $108,968     $ 7,872      $197,891     $298,987       66.2%
                                              --------     -------      --------     --------       ----
     Total premiums written...............    $108,968     $ 7,872      $197,891     $298,987       66.2%
                                              ========     =======      ========     ========       ====
Premiums earned:
  Property and casualty insurance.........    $103,993     $ 7,392      $186,939     $283,540       65.9%
                                              --------     -------      --------     --------       ----
     Total premiums earned................    $103,993     $ 7,392      $186,939     $283,540       65.9%
                                              ========     =======      ========     ========       ====
YEAR ENDED DECEMBER 31, 1998
Premiums written:
  Property and casualty insurance.........    $105,289     $ 7,622      $172,935     $270,602       63.9%
                                              --------     -------      --------     --------       ----
     Total premiums written...............    $105,289     $ 7,622      $172,935     $270,602       63.9%
                                              ========     =======      ========     ========       ====
Premiums earned:
  Property and casualty insurance.........    $103,298     $ 7,564      $163,003     $258,737       63.0%
                                              --------     -------      --------     --------       ----
     Total premiums earned................    $103,298     $ 7,564      $163,003     $258,737       63.0%
                                              ========     =======      ========     ========       ====
</TABLE>

                                        25
<PAGE>   26

                                                                      SCHEDULE V

                    CNA SURETY CORPORATION AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS
CNA SURETY CORPORATION AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND
                                      1998

<TABLE>
<CAPTION>
                                                                   ADDITIONS
                                                            ------------------------
                                          BALANCE AT        CHARGED TO    CHARGED TO                      BALANCE
                                         BEGINNING OF       COSTS AND       OTHER                        AT END OF
                                            PERIOD           EXPENSES      ACCOUNTS     DEDUCTIONS(1)     PERIOD
                                         ------------       ----------    ----------    -------------    ---------
                                                                  (AMOUNTS IN THOUSANDS)
<S>                                      <C>                <C>           <C>           <C>              <C>
CNA SURETY CORPORATION
YEAR ENDED DECEMBER 31, 2000
  Allowance for possible losses on
     premiums receivable.............       $2,826            $  837          $--          $(1,013)       $2,650
                                            ======            ======          ==           =======        ======
  Allowance for possible losses on
     reinsurance receivable..........       $   --            $   --          $--          $    --        $   --
                                            ======            ======          ==           =======        ======
YEAR ENDED DECEMBER 31, 1999
  Allowance for possible losses on
     premiums receivable.............       $1,465            $1,786          $--          $  (425)       $2,826
                                            ======            ======          ==           =======        ======
  Allowance for possible losses on
     reinsurance receivable..........       $   --            $   --          $--          $    --        $   --
                                            ======            ======          ==           =======        ======
YEAR ENDED DECEMBER 31, 1998
  Allowance for possible losses on
     premiums receivable.............       $  968            $1,041          $--          $  (544)       $1,465
                                            ======            ======          ==           =======        ======
  Allowance for possible losses on
     reinsurance receivable..........       $   --            $   --          $--          $    --        $   --
                                            ======            ======          ==           =======        ======
</TABLE>

-------------------------
()(1) Accounts charged against allowance.

                                        26
<PAGE>   27

                                                                     SCHEDULE VI

                    CNA SURETY CORPORATION AND SUBSIDIARIES

             SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY
                              INSURANCE OPERATIONS
CNA SURETY CORPORATION AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND
                                      1998

<TABLE>
<CAPTION>
                                                         YEAR ENDED      YEAR ENDED      YEAR ENDED
                                                        DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                            2000            1999            1998
                                                        ------------    ------------    ------------
                                                                   (AMOUNTS IN THOUSANDS)
<S>                                                     <C>             <C>             <C>
Deferred policy acquisition costs.....................    $ 91,403        $ 84,924        $ 74,488
                                                          ========        ========        ========
Reserves for unpaid claims and claim adjustment
  expenses............................................    $204,457        $157,933        $150,020
                                                          ========        ========        ========
Discount (if any) deducted............................    $     --        $     --        $     --
                                                          ========        ========        ========
Unearned premiums.....................................    $202,179        $199,300        $183,708
                                                          ========        ========        ========
Net premium revenue...................................    $301,819        $283,540        $258,737
                                                          ========        ========        ========
Net investment income.................................    $ 29,897        $ 25,850        $ 24,259
                                                          ========        ========        ========
Net claims and claim expenses incurred related to:
  Current year........................................    $ 62,776        $ 57,757        $ 49,350
                                                          ========        ========        ========
  Prior years.........................................    $ (7,093)       $(13,085)       $ (4,352)
                                                          ========        ========        ========
Amortization of deferred policy acquisition costs.....    $133,635        $119,746        $105,420
                                                          ========        ========        ========
Net paid claims and claim adjustment expenses.........    $ 58,854        $ 49,237        $ 25,689
                                                          ========        ========        ========
Net premiums written..................................    $304,468        $298,987        $270,602
                                                          ========        ========        ========
</TABLE>

                                        27
<PAGE>   28

(A)(3) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
  2(1)     Reorganization Agreement dated as of December 19, 1996 among
           Capsure Holdings Corp., Continental Casualty Company, CNA
           Surety Corporation, Surety Acquisition Company and certain
           affiliates of Continental Casualty Company (filed on
           December 27, 1996 as Exhibit 2 to Capsure Holdings Corp.'s
           Form 8-K, and incorporated herein by reference).
  2(2)     First Amendment to the Reorganization Agreement dated as of
           July 14, 1997 among Capsure Holdings Corp., Continental
           Casualty Company, CNA Surety Corporation, Surety Acquisition
           Company and certain affiliates of Continental Casualty
           Company (filed on July 16, 1997 as Exhibit 2 to Capsure
           Holdings Corp.'s Form 8-K, and incorporated herein by
           reference).
  3(1)     Certificate of Incorporation of CNA Surety Corporation dated
           December 10, 1996 (filed on August 15, 1997 as Exhibit 3(1)
           to CNA Surety Corporation's Registration Statement on Form
           S-4 (Registration No. 333-33753), and incorporated herein by
           reference).
  3(2)     Amendment to Certificate of Incorporation of CNA Surety
           Corporation dated May 27, 1997 (filed on August 15, 1997 as
           Exhibit 3(2) to CNA Surety Corporation's Registration
           Statement on Form S-4 (Registration No. 333-33753), and
           incorporated herein by reference).
  3(3)     Bylaws of CNA Surety Corporation (filed on August 15, 1997
           as Exhibit 3(3) to CNA Surety Corporation's Registration
           Statement on Form S-4 (Registration No. 333-33753), and
           incorporated herein by reference).
  3(4)     Amendment to Bylaws of CNA Surety Corporation (filed on
           September 23, 1998 as Exhibit 4(3) to CNA Surety
           Corporation's Registration Statement on Form S-8
           (Registration No. 333-64135), and incorporated herein by
           reference).
  4(1)     Specimen certificate of CNA Surety Corporation (filed on
           August 15, 1997 as Exhibit 4(1) to CNA Surety Corporation's
           Registration Statement on Form S-4 (Registration No.
           333-33753), and incorporated herein by reference).
  9        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(4)     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 December 27, 1996 as Exhibit 2 to Capsure
           Holdings Corp.'s Form 8-K, and incorporated herein by
           reference).
 10(5)     Form of Surety Quota Share Treaty by and between Western
           Surety Company 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(6)     Employment Agreement dated as of October 3, 1999 by and
           between CNA Surety Corporation and Mark C. Vonnahme (filed
           on March 24, 2000 as Exhibit 10(9) to CNA Surety
           Corporation's Annual Report on Form 10-K, and incorporated
           herein by reference).
</TABLE>

                                        28
<PAGE>   29

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
 10(7)     Employment Agreement dated as of January 1, 2000 by and
           between CNA Surety Corporation and Robert E. Ayo (filed on
           March 24, 2000 as Exhibit 10(10) to CNA Surety Corporation's
           Annual Report on Form 10-K, and incorporated herein by
           reference).
 10(8)     Consulting Agreement dated as of March 14, 2001 by and
           between CNA Surety Corporation and Robert E. Ayo.
 10(9)     Employment Agreement dated as of January 1, 2000 by and
           between CNA Surety Corporation and John S. Heneghan (filed
           on March 24, 2000 as Exhibit 10(12) to CNA Surety
           Corporation's Annual Report on Form 10-K, and incorporated
           herein by reference).
 10(10)    Employment Agreement dated as of October 3, 1999 by and
           between CNA Surety Corporation and Steven T. Pate (filed on
           March 24, 2000 as Exhibit 10(13) to CNA Surety Corporation's
           Annual Report on Form 10-K, and incorporated herein by
           reference).
 10(11)    Employment Agreement dated as of January 1, 2000 by and
           between CNA Surety Corporation and David F. Paul (filed on
           March 24, 2000 as Exhibit 10(14) to CNA Surety Corporation's
           Annual Report on Form 10-K, and incorporated herein by
           reference).
 10(12)    Credit Agreement dated as of September 30, 1997, among CNA
           Surety Corporation, the lenders party thereto, and Chase
           Manhattan Bank, as Administrative Agent (filed on July 9,
           1998 as Exhibit 10(13) to CNA Surety Corporation's
           Registration Statement on Form S-1 (Registration No.
           333-56063), and incorporated herein by reference).
 10(13)    Surety Second 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 July 9, 1998 as Exhibit 10(14) to CNA
           Surety Corporation's Registration Statement on Form S-1
           (Registration No. 333-56063), and incorporated herein by
           reference).
 10(14)    Form of CNA Surety Corporation Non-Employee Directors
           Deferred Compensation Plan (filed on July 9, 1998 as Exhibit
           10(15) to CNA Surety Corporation's Registration Statement on
           Form S-1 (Registration No. 333-56063), and incorporated
           herein by reference).
 10(15)    Form of CNA Surety Corporation Deferred Compensation Plan
           (filed on March 24, 2000 as Exhibit 10(18) to CNA Surety
           Corporation's Annual Report on Form 10-K, and incorporated
           herein by reference).
 10(16)    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).
 11        Earnings per share computation.
 12        Not Applicable.
 13        2000 Annual Report to Shareholders
 21        Subsidiaries of the Registrant.
 22        Not Applicable.
 23        Consent of Deloitte & Touche LLP dated March 23, 2001.
 24        Not Applicable.
</TABLE>

                                        29
<PAGE>   30

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                          CNA SURETY CORPORATION

                                                 /s/ MARK C. VONNAHME
                                          --------------------------------------
                                                     Mark C. Vonnahme
                                          President and Chief Executive Officer
                                              (Principal Executive Officer)

                                                 /s/ JOHN S. HENEGHAN
                                          --------------------------------------
                                                     John S. Heneghan
                                            Vice President and Chief Financial
                                                         Officer
                                           (Principal Financial and Accounting
                                                         Officer)

Dated: March 23, 2001

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
DATE                     TITLE                             SIGNATURE
----                     -----                             ---------
<S>              <C>                     <C>
March 23, 2001   Chairman of the Board               /s/ THOMAS F. TAYLOR
                     and Director        ---------------------------------------------
                                                       Thomas F. Taylor

March 23, 2001         Director                       /s/ GIORGIO BALZER
                                         ---------------------------------------------
                                                        Giorgio Balzer

March 23, 2001         Director                       /s/ PHILIP H. BRITT
                                         ---------------------------------------------
                                                         Philip Britt

March 23, 2001         Director                        /s/ EDWARD DUNLOP
                                         ---------------------------------------------
                                                         Edward Dunlop

March 23, 2001         Director                         /s/ MELVIN GRAY
                                         ---------------------------------------------
                                                          Melvin Gray

March 23, 2001         Director                        /s/ JOE P. KIRBY
                                         ---------------------------------------------
                                                         Joe P. Kirby

March 23, 2001         Director                        /s/ ROY E. POSNER
                                         ---------------------------------------------
                                                         Roy E. Posner
</TABLE>

                                        30
<PAGE>   31

<TABLE>
<CAPTION>
DATE                     TITLE                             SIGNATURE
----                     -----                             ---------
<S>              <C>                     <C>
March 23, 2001         Director                      /s/ ADRIAN M. TOCKLIN
                                         ---------------------------------------------
                                                       Adrian M. Tocklin

March 23, 2001         Director                      /s/ MARK C. VONNAHME
                                         ---------------------------------------------
                                                       Mark C. Vonnahme
</TABLE>

                                        31