Western Surety leases office space for its executive offices at 101 South Phillips Avenue, Sioux Falls, South Dakota 57104, under a lease expiring in 2002. Western Surety's office space, consisting of approximately 81,600 square feet, is leased from a partnership in which Western Surety owns a 50% interest. The annual rent, which is subject to annual adjustments, was $1.5 million as of December 31, 1997. Western Surety also leases a 7,900 square foot branch office in Dallas, Texas. Annual rent for the branch office was $0.2 million and the lease expires in 1999. USA leases office space for its executive offices at 950 Echo Lane, Suite 250, Houston, Texas 77024, under a lease terminating in 2000 with an annual rent of $0.2 million. USA also leases space for 7 branch offices for an additional annual rent of approximately $0.1 million.
CNA Surety Corporation is a newly formed 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 this Form 10-K.
(1) CNAF acquired The Continental Insurance Company ("Continental") in May 1995. Results include the surety operations of Continental since its acquisition in May 1995 which affects the comparability of financial information.
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. Western Surety writes, on a direct basis or as business assumed from CCC and CIC, small fidelity and noncontract 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
approximately $14.2 million ($9.2 million net of tax, or $0.21 in pro forma earnings per share) for the three months and year ended December 31, 1996, respectively.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure," which establishes standards for disclosing information about an entity's capital structure. The Statement consolidates existing disclosure requirements for ease of retrieval and greater visibility to nonpublic entities. The new Statement contains no change in disclosure requirements for companies previously subject to the requirements of APB No. 10, "Omnibus Opinion -- 1966," APB Opinion No. 15, "Earnings per Share," and FASB Statement No. 47 "Disclosure of Long-Term Obligations," and as such the adoption of SFAS No. 129 did not have any effect on the Company's financial reporting.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which revises employers' disclosures about pensions and other postretirement benefit plans. SFAS No. 132 does not change the measurement or recognition requirements of those plans under the previous accounting standards. The new standardized disclosures require additional information on changes in the benefit obligations and fair value of plan assets as well as eliminate certain disclosures from prior accounting standards that are no longer as useful. This statement is applicable for fiscal years beginning after December 15, 1997. Restatement of disclosures of prior periods for comparative purposes is required. This Statement is not expected to result in a significant change in CNA Surety's disclosures.