ZENITH REPORTING LOSSES SEPT. 11 ATTACKS CITED IN $7.3 MILLION HIT.

Byline: Evan Pondel Staff Writer

WOODLAND HILLS - Zenith National Insurance Corp. on Wednesday said it lost $7.3 million in the fourth quarter, most of it attributed to the Sept. 11 terrorist attacks.

``We pray and hope that this is a one-time occurrence,'' said Stanley Zax, chairman, president and chief executive officer of Woodland Hills- based Zenith.

The loss for the quarter that ended Dec. 31 equaled 41 cents a share. In the year-ago period, Zenith recorded a loss of $10.6 million, or 61 cents per share.

Fourth-quarter revenues were $163.3 million, compared with $125.4 million a year ago. For the year, the insurer lost $23.8 million, or $1.35 a share, versus a loss of $46.8 million, or $2.72 per share, the same period last year.

Revenues for 2001 were $622 million, compared with $459.6 million.

The company said that claims from the attacks cost it $24.4 million after tax.

Analysts think the company is still in good shape.

``Looking long beyond these results, most of these guys (companies in the insurance sector) look pretty strong,'' said Aaron Westrate, analyst with Morningstar in Chicago. ``You need to think forward.''

Westrate's optimism stems from the ability of companies like Zenith to raise premiums in the wake of a major tragedy. Westrate said insurance companies are increasing their premiums across the board, which will invariably lead to greater profits.

After Sept. 11, Zenith's stock plunged $5 as investors became nervous about the losses insurance companies were likely to face, Westrate said. However, just as October set in, Zenith shares began rising again.

``These companies may have taken a huge dip post Sept. 11, but that reversed as investors caught onto the idea,'' he said. ``The longer term picture became clearer with most of these companies being able to increase their premiums.''

For Zax, the ability to raise premiums decreases the sting of Zenith's less-than-stellar results. He said tragedies like Sept. 11 are obviously catastrophic, but that's what keeps insurance companies in business.

``It's the purest form of insurance ... and the whole world is a buyer,'' he said. ``If events are horrible, premiums go up. Now that prices are rising, it's one of the few places the seller has some kind of pricing capability.''

As companies are able to raise their premiums with relative ease, some firms known as reinsurers are seeing an opportunity to enter the field. Westrate said reinsurers, who provide financial support for insurance companies, can enter the sector with little overhead.

``They have no history and can emerge in the field charging the same premiums as these larger insurance companies,'' he said.

While Zenith's reinsurance business isn't a vital source of income for the company, its pricing has increased. Zax said that barring major catastrophes, he's optimistic about the company's future in this area.

Even so, one concern that may arise for Zenith and other insurance companies is the amount of reinsurers entering the field.

'`With more capital pouring into the field, it could restrain the length at which the players are raising their premiums,'' Westrate said.

Zenith shares declined 20 cents to $29.90 on Wednesday.