Zenith Reports Year-End Net Loss of $23.8M

February 13, 2002

California-based Zenith National Insurance Corp. reported a net loss for the year ended Dec. 31, 2001 of $23.8 million, or $1.35 per share, compared to a net loss for the year ended Dec. 31, 2000 of $46.8 million, or $2.72 per share.

Net loss for the fourth quarter of 2001 was $7.3 million, or $0.41 per share, compared to a net loss for the fourth quarter of 2000 of $10.6 million, or $0.61 per share. As previously reported, the losses in 2001 are mainly attributable to $37.6 million of pre-tax incurred losses, or $24.4 million after tax, or $1.39 per share, from the World Trade Center events of Sept. 11.

Operating loss after tax for the year ended Dec. 31, 2001 was $29.8 million, or $1.69 per share, compared to an operating loss after tax of $37.7 million, or $2.19 per share, for the year ended Dec. 31, 2000. Operating results for the fourth quarter of 2001 were a loss after tax of $9.3 million, or $0.52 per share, compared to an operating loss after tax of $7.2 million, or $0.42 per share, for the fourth quarter of 2000.

Results include catastrophe losses after tax of $27.1 million, or $1.54 per share, for the year ended Dec. 31, 2001 and $6.0 million, or $0.34 per share, for the fourth quarter of 2001 compared to catastrophe losses after tax of $14.7 million, or $0.85 per share, for the year ended Dec. 31, 2000 and $1.4 million, or $0.08 per share, for the fourth quarter of 2000.

The combined ratio for the property-casualty insurance operations was 118.9 percent for the year ended Dec. 31, 2001 compared to 130.2% for the comparable period of 2000. Excluding catastrophe losses, the combined ratio for the year ended Dec. 31, 2001 was 110.2 percent compared to 123.6 percent for the comparable period of 2000. The combined ratio for the workers’ compensation operations for the year ended Dec. 31, 2001 was 114.0 percent compared to 129.2 percent for the comparable period of 2000. Book value per share at Dec. 31, 2001 was $16.31 compared to $17.76 at Dec. 31, 2000. Excluding the effect of unrealized gains and losses on available-for-sale, fixed maturity investments, book value per share at Dec. 31, 2001 was $16.36 compared to $18.31 at Dec. 31, 2000.

“We made substantial progress in improving our results in 2001 compared to 2000, but did not return to profitability due to losses incurred in our reinsurance business from the World Trade Center events of September 11,” Chairman Stanley Zax commented. “Our workers’ compensation combined ratio improved 15 points to 114 percent and we expect further improvement this year. Reinsurance pricing and terms are improved, and, barring major catastrophes, we are optimistic about the future.

“In the fourth quarter, we increased catastrophe loss estimates in the reinsurance business by $9.2 million, of which $6.6 million related to the events of September 11. Our current estimate of workers’ compensation reserves for accident years 2000 and prior is unchanged compared to last year-end. In the fourth quarter of 2001 we increased our estimate of the 2001 accident year workers’ compensation loss ratio by about a point to recognize higher than anticipated increases in health-care costs.”

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