Zenith Announces Second Quarter Results.WOODLAND HILLS, Calif. -- 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 Corp. (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 ) reported net income for the second quarter 2008 of $28.4 million, or $0.76 per share, compared to net income for the second quarter 2007 of $65.3 million, or $1.75 per share. Net income for the six months ended June 30, 2008 was $70.3 million, or $1.88 per share, compared to net income for the six months ended June 30, 2007 of $129.8 million, or $3.48 per share. Net income in the three months ended June 30, 2008 includes net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. on investments after tax of $1.5 million, or $0.04 per share, compared to net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on investments after tax of $3.4 million, or $0.09 per share, in the corresponding period of 2007. Net income in the six months ended June 30, 2008 includes net realized gains on investments after tax of $1.4 million, or $0.04 per share, compared to $7.3 million, or $0.19 per share, in the corresponding period of 2007. Underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. before tax from the 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. segment was $26.5 million and $66.5 million in the three and six months ended June 30, 2008, respectively, compared to $71.5 million and $132.8 million in the corresponding periods of 2007. Workers' compensation calendar year combined ratios, along with a reconciliation to the accident year combined ratios, were as follows: [TABLE OMITTED] For 2008, pre-tax favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. workers' compensation loss reserve development on prior accident years was $15.0 million in the second quarter compared to $23.2 million in the first quarter. For 2007, pre-tax favorable workers' compensation loss reserve development on prior accident years was $34.2 million, $44.0 million, $24.9 million and $10.3 million in the first, second, third and fourth quarters, respectively. Total workers' compensation net premiums earned decreased 17.8% in the six months ended June 30, 2008 compared to the corresponding period of 2007, with California workers' compensation net premiums earned decreasing 20.4% for the comparable period. These decreases reflect both the reduction in premium rates due to favorable loss cost trends from the California and Florida legislative reforms, as well as the impact of competition. Insured payroll, our best indicator of exposure, decreased 3.0% for California as of June 30, 2008 compared to December 31, 2007 and decreased 2.1% outside California. For the twelve months ended December 31, 2007, insured payroll decreased 14.5% in California and increased 1.1% outside California. Consolidated stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. per share was $29.22, $29.58 and $28.93 at June 30, 2008, March 31, 2008 and December 31, 2007, respectively. Return on average equity in the six months ended June 30, 2008 was 13.4% compared to 25.9% in the corresponding period of 2007 and 22.9% in the year ended December 31, 2007. Commenting on the results, Stanley R. Zax zax n. A tool similar to a hatchet, used for cutting and dressing roofing slates. [Variant of sax, from Middle English, knife, from Old English seax; see sek- , Chairman and President, said: "Our underwriting income for the second quarter declined compared to the second quarter last year due to lower premiums and lower favorable loss reserve development as the loss trends for prior accident years continue to be stable. The combined ratio of 78.7% for the six months is higher by 13.6 percentage points from the comparable period of 2007, but is at excellent levels in historical context. New benefit schedules in California, which are expected to be effective for injuries occurring after January 1, 2009, will most likely require rate increases of about 5%." The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. if accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed. Forward-looking statements include those related to the plans and objectives of management for future operations, future economic performance, or projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure, or other financial items. Statements containing words such as expect, anticipate, believe, estimate, likely or similar words that are used in this release or in other written or oral information conveyed by or on behalf of Zenith are intended to identify forward-looking statements. Zenith undertakes no obligation to update such forward-looking statements, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to the following: (1) competition; (2) payroll levels of our customers; (3) weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. economy; (4) adverse
state and federal legislation and regulation; (5) changes in interest
rates causing fluctuations of investment income and fair values of
investments; (6) changes in the frequency and severity of claims and
catastrophes; (7) adequacy of loss reserves; (8) changing environment
for controlling medical, legal and rehabilitation rehabilitation: see physical therapy. costs, as well as
fraud and abuse; (9) losses associated with any terrorist attacks that
impact our workers' compensation business in excess of our
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. protection; (10) losses caused by nuclear, biological,
chemical or radiological radiologicalpertaining to radiology. radiological diagnosis see radiological diagnosis. mobile radiological apparatus x-ray machines that can be moved but are not portable because of their weight. events whether or not there is any applicable reinsurance protection; and (11) other risks detailed herein and from time to time in Zenith's reports and filings with the Securities and Exchange Commission. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] HOW WE REPORT OUR RESULTS Our business is comprised of the following segments: investments, workers' compensation and reinsurance. In September 2005, we exited the reinsurance business. Results of the investments segment include net investment income and net realized gains (losses) on investments and we do not allocate investment income to our workers' compensation and reinsurance segments. Income (loss) before tax from the workers' compensation and reinsurance segments is determined by deducting losses and loss adjustment expenses incurred 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. and other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. from net premiums earned (this result is also known as underwriting income or loss). The parent loss includes interest expense and the general operating expenses of the holding company, Zenith National Insurance Corp. NON-GAAP MEASURES In addition to the financial measures presented in the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge prepared in accordance with accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), we also use certain non-GAAP financial measures to analyze and report our financial results. Management believes that these non-GAAP measures, when used in conjunction with the consolidated financial statements, can aid in understanding our financial condition and results of operations. These non-GAAP measures are not a substitute for GAAP measures, and where these measures are described we provide information that reconciles the non-GAAP measures to the GAAP measures reported in our consolidated financial statements. Combined Ratio The combined ratio, expressed as a percentage, is a key measurement of profitability traditionally used in the property-casualty insurance business. The combined ratio, also referred to as the "calendar year combined ratio," is the sum of the losses and loss adjustment expense ratio and the underwriting and other operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. ratio. The losses and loss adjustment expense ratio is the percentage of net losses and loss adjustment expenses incurred to net premiums earned. The underwriting and other operating expense ratio is the percentage of underwriting and other operating expenses to net premiums earned. When the calendar year combined ratio is adjusted to exclude prior period items, such as loss reserve development and policyholders' dividends, it becomes the "accident year combined ratio," a non-GAAP financial measure. Net Cash Flow From the Workers' Compensation Business Net cash flow from our workers' compensation business is a non-GAAP financial measure that represents the net cash flow generated by deducting from workers' compensation premiums collected during the period the amount of workers' compensation losses and loss adjustment expenses paid and workers' compensation underwriting and other operating expenses paid during the applicable period. We provide this measure to assist in understanding the change in the net cash (used in) provided by operating activities in the periods presented, given that we exited the reinsurance business in 2005. Net cash flow from the workers' compensation business does not include the following: premiums collected, losses paid and underwriting and other operating expenses paid in the reinsurance business; investment income received; interest and other expenses paid by our parent company; and income taxes paid, all of which are included in net cash (used in) provided by operating activities, the most comparable GAAP financial measure of net cash flow. The following table provides a reconciliation of the net cash flow from our workers' compensation business to the net cash (used in) provided by operating activities: [TABLE OMITTED] NON-GAAP MEASURES (continued) Premiums Written Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. is a non-GAAP financial measure representing the amount of premiums we have billed to our policyholders in the applicable period. It is indicative of the amount of cash premium before commission expense that we expect to receive from our policies for the applicable period. Net premiums written represent the amount of premiums we have billed to our policyholders in the applicable period less the cost of any reinsurance ceded. Net premiums earned, the most comparable GAAP measure, represent the portion of premiums written that is recognized as earned in the financial statements for the periods presented. Premiums are earned on a pro-rata basis over the term of the policies or reinsurance contracts. The following table provides a reconciliation of workers' compensation gross and net premiums written to net premiums earned: [TABLE OMITTED] |
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