Zenith Nat’l Ratings Fall

S&P lowered its counterparty credit rating on Zenith National Insurance Corp. (ZNT) to “BB+” from “BBB-” and its ratings on ZNT’s affiliates, Zenith Insurance Co. and ZNAT Insurance Co. (Zenith), to “BBB+”from “A-“due to poor but improving operating results in workers’ compensation and large losses in 2000 and 2001 in assumed reinsurance. The outlook is stable.

Although Zenith has a history of successful operations, bad conditions in its primary workers’ comp market have adversely affected the company, according to an S&P analyst. Its assumed reinsurance, a secondary line, has suffered heavy losses from weather-related events and from the World Trade Center terrorist attacks.

By consistently adhering to its strategy, Zenith has positioned itself to take advantage of good conditions in the California market for the next year or two, despite the activities of the State Fund. Results in California should be good enough to outweigh lackluster results in Florida. If profitability in assumed reinsurance is at roughly the average of what Zenith has produced in this line over the years, ZNT and Zenith should record satisfactory earnings through at least 2002. Capitalization should remain satisfactory and perhaps continue to be a marginal strength for the rating.