THE SURETY BUSINESS… like most other businesses go through fluctuations of profits and losses, but these fluctuations do not necessarily match the ups and downs of our economy. Where our economy has been excellent for the last five to six years, the losses by the surety industry have been increasing, even on a percentage of losses to written premium. I have a list for you from 1995 through 2000, the direct premiums, net losses and net loss ratio. Every company has a different overhead factor, so a 25% net loss ratio in one company may be equivalent to a combined loss ratio (expenses plus net losses) of over 100%. In another company, the overhead factors may be less, so it may result in some net profit, but you cannot look at the difference between 100% and the net loss ratio as being the profit made by the surety companies. In that regard, please note:

1995 $2.47 Billion $524.9 Million 22.9%
1996 $2.66 Billion $598.8 Million 22.1%
1997 $2.77 Billion $639.8 Million 22.6%
1998 $2.91 Billion $587.3 Million 22.4%
1999 $3.40 Billion $674.8 Million 23.8%
2000 $3.71 Billion $766.9 Milion 27.0%

Once again, as in any other business, when certain companies are losing money without meeting financial expectations, these units will often be sold or merged. In recent years, the surety industry has seen tremendous consolidations. I will list eight of the major consolidations in recent years:

  1. St. Paul, Seaboard Surety and USF&G

  2. C N A, Continental Insurance, Universal Insurance, Western Surety

  3. Liberty, Peerless, Wausau

  4. Travelers, Reliance

  5. Kemper, Universal Bonding, Lou Jones Associates

  6. Safeco, American States

  7. XL Surety, Intercargo, NAC Re, CGU

  8. Zurich, Fidelity and Deposit, Mountbatten Surety

It is anticipated that the mergers and acquisitions will continue and with less players in the marketplace, the very competitive environment that we have had in the last decade will change and underwriting standards will harden as surety capacity decreases.

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"A people that values its privileges above its principles soon losses both." - Dwight D. Eisenhower

"Men make counterfeit money, in many more cases, money makes counterfeit men." - Sidney J. Harris

"Life is an exciting business and most exciting when it is lived for others." - Helen Keller

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I AM DAMN PROUD TO BE AN AMERICAN… because I will not be sending out another Bond Newsletter before the Fourth of July, I did want to comment on the great blessing and privilege it is to be an American. In that regard, I would like to quote from an editorial digest from Gordon Sinclair, a Canadian television commentator. What follows is the partial text of his remarks:

"This Canadian thinks it is time to speak up for the Americans as the most generous and possibly the least appreciated people on all the earth. Germany, Japan and to a lesser extent Britain and Italy were lifted out of the debris of war by the Americans who poured in billions of dollars and forgave other billions in debts. None of these countries is today paying even the interest on its remaining debts to the United States.

When the Franc was in danger of collapsing in 1956, it was the Americans who propped it up, and their reward was to be insulted and swindled off the streets of Paris. I was there. I saw it. When earthquakes hit in distant cities, it was the United States that hurries in to help. From the Spring of 2000, 59 American communities were flattened by tornadoes. Nobody helped. The Marshall Plan and Truman Policy pumped billions of dollars into discouraged countries. Now newspapers in those countries are writing about the decadent, war-mongering Americans. There is no other country on earth capable of putting a man or woman on the moon. You talk about Japanese Technocracy, and you get radios. You talk about German Technocracy, and you get automobiles. You talk American Technocracy and you find men on the moon--not once, but several times and safely home again. You talk about scandals, and the Americans put their's right in the store windows for everybody to look at.

Even their draft-dodgers are not pursued and hounded. They are here on our streets, and most of them, unless they are breaking Canadian laws, are getting American dollars from Ma and Pa at home to spend here. When the railways of France, Germany and India were breaking down through age, it was the Americans who rebuilt them. When the Pennsylvania Railroad the New York Central went broke, nobody loaned them an old caboose. Both are still broke. I can name you 5,000 times when the Americans raced to the help of other people in trouble. Can you name me even one time when someone else raced to the Americans in trouble? I don't think there was outside help even during the San Francisco earthquake. My neighbors have faced it alone and I am one Canadian who is damned tired of hearing them get kicked around."

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"All that is essential for the triumph of evil is that good men do nothing" - Edmund Burke

"The measure of a man's real character is what he would do if he knew he would never be found out." - Thomas Macaulay

"There's one way to find out if a man's honest - ask him. If he says "yes", you know he's crooked." - Groucho Marx

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