A.M. Best Affirms Ratings of Zenith National Insurance Group

May 23, 2005

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and has assigned issuer credit ratings (ICR) of “a-” to Woodland Hills, Calif.-based Zenith National Insurance Group. The ratings apply to three intercompany pool members and are based on the consolidated operating performance and financial condition of the three insurers. A.M. Best has also affirmed the ICR of “bbb-” of Zenith National Insurance Corp.

Concurrently, A.M. Best has affirmed the senior debt rating of “bbb-” on existing convertible notes issued by Zenith National and the subordinated debt rating of “bb” on existing capital securities issued by Zenith National Insurance Capital Trust I, a subsidiary of Zenith National. All ratings have a stable outlook.

These ratings reflect Zenith’s disciplined approach to pricing and underwriting, which has consistently produced an accident year loss ratio advantage for the group in its primary line, workers’ compensation. The group also benefits from the financial flexibility of Zenith National.

Partially offsetting these positive rating factors is Zenith’s poor operating results from 1999-2001 due to increased losses in its assumed reinsurance business and lower than historical workers’ compensation earnings, reflective of the adverse industry pricing environment. Given the firming market conditions in recent years and the favorable impact of reform legislation in California, operating results have improved and are expected to remain strong at least through 2005. As premium grows, A.M. Best looks for management to continue its ongoing commitment to appropriately capitalize the insurance subsidiaries commensurate with the financial strength rating.

The financial strength rating of A- (Excellent) has been affirmed and issuer credit ratings of “a-” have been assigned to Zenith National Insurance Group and its following intercompany pool members:

Zenith Insurance Company
Zenith Star Insurance Company
ZNAT Insurance Company

The issuer credit rating of “bbb-” has been affirmed for Zenith National Insurance Corporation.

The following debt ratings have been affirmed:

Zenith National Insurance Corporation–

“bbb-” on the $125.0 million 5.75% convertible senior notes, due 2023
Zenith National Insurance Capital Trust I–

“bb” on the $75.0 million 8.55% capital securities, due 2028

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