A.M. Best Affirms Zenith National Ratings; Assigns Initial Debt Rating.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 13, 2002 A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Zenith zenith, in astronomy, the point in the sky directly overhead; more precisely, it is the point at which the celestial sphere is intersected by an upward extension of a plumb line from the observer's location. National Insurance Group (Zenith), (Woodland Hills, CA). The financial strength rating applies to three intercompany pool members and is based on the consolidated operating performance and financial condition of the three insurers. Concurrently, a "bbb-" subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". rating has been assigned to existing capital securities issued by Zenith National Insurance Trust I, a subsidiary of Zenith National Insurance Corp. (Zenith National) (NYSE NYSE See: New York Stock Exchange : ZNT ZNT Zenith National Insurance Corp ZNT Zinc Transporter ZNT Zeitschrift für Neues Testament (German) ZNT Zentrum Neue Technologien (German) ZNT Journal Library for Natural Sciences and Technology ). The rating outlook for all assigned ratings is stable. The ratings reflect Zenith's disciplined approach to pricing and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. which has consistently produced an accident year loss ratio advantage for the group in its primary line, workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. . To management's credit, the group significantly reduced premium after open rating began in California in January 1995, causing severe price competition in that state. Rates in California, where the group writes over 50% of its business, started to improve in 2000, alleviating some of the underwriting pressure driven by double-digit claims cost inflation. Given Zenith's conservative operating philosophy and solid market position, the group is better positioned than most other carriers to benefit from the improving conditions of the California workers' compensation market. Partially offsetting these positive rating factors is Zenith's weakened capitalization, caused by poor operating results in its assumed reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. business for the last three years as well as lower-than-historical workers' compensation earnings reflecting the adverse industry pricing environment. Zenith's operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in 2001 was largely the result of $38 million of net pre-tax losses incurred in its assumed reinsurance business attributable to the World Trade Center tragedy. This loss followed significant reinsurance losses from the December 1999 European windstorms A European windstorm is a severe cyclonic storm that tracks across the North Atlantic towards northwestern Europe in the winter months. These storms usually track over the north coast of Scotland towards Norway but can veer south to affect other countries including England, Wales, reflected in 1999 and 2000 operating results. While Zenith's assumed reinsurance business has performed poorly in recent years, it has been a very profitable book over the long term. Also, prices and terms, including a terrorism exclusion on all reinsurance policies, have improved considerably over the last year. However, Zenith's policyholder surplus declined as a result of these reinsurance losses while, at the same time, premium production grew significantly, weakening the group's overall capitalization. Zenith National contributed over $47 million to the insurance operations in September 2002 to provide support for the increased premium volume in 2002, alleviating A.M. Best's concerns regarding the group's immediate capitalization needs. The rating affirmation with a stable outlook reflects management's ongoing commitment to appropriately capitalize the insurance subsidiaries commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with its rating, as well as A.M. Best's expectations of improved operating results going forward. The following debt rating has been assigned to Zenith National Insurance Corporation's existing debt: Zenith National Insurance Capital Trust I-- "bbb-" on the $65.7 million 8.55% Capital Securities, due 2028 The A- (Excellent) financial strength rating of the intercompany pool members of Zenith National Insurance Group has been affirmed with a stable outlook: Zenith Insurance Company Zenith Star Insurance Company ZNAT Insurance Company A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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