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A.M. Best Affirms Ratings of Zenith National Insurance Corporation and Its Subsidiaries.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Zenith National Insurance Group and its members, Zenith Insurance Company (Zenith) and ZNAT Insurance Company (ZNAT), a wholly owned subsidiary of Zenith. Concurrently, A.M. Best has affirmed the ICR of "bbb" of the group's parent, Zenith National Insurance Corporation (Zenith National) (NYSE: ZNT). Zenith and ZNAT operate as subsidiaries of Zenith National. The above ratings are based on the consolidated operating performance and financial condition of Zenith and ZNAT.

A.M. Best also has affirmed the debt rating of "bb+" on $58.35 million 8.55% capital securities, due 2028 of Zenith National Insurance Capital Trust I. The debt rating of "bbb" on $1.15 million 5.75% convertible senior unsecured notes, due 2023 of Zenith National, was retired as all remaining notes were converted as of March 31, 2008. All companies are domiciled in Woodland Hills, CA. The outlook for all ratings is stable.

The ratings reflect Zenith's excellent capitalization, strong operating performance and disciplined underwriting approach, which has consistently produced a significant accident year loss ratio advantage for the group within its primary line, workers' compensation. The group also benefits from the financial flexibility of Zenith National, which provides access to capital as needed.

Partially offsetting these positive rating factors is the adverse reserve development in earlier years, partially attributable to increased losses within Zenith's assumed reinsurance business, which the group exited in 2005, as well as the competitive pricing environment of the late 1990's and the resulting impact on the workers' compensation line. Despite these concerns, the outlook reflects the strong underwriting performance and demonstrated experience underwriting the workers' compensation line over market cycles.

Zenith has demonstrated a significant loss ratio advantage within the workers' compensation line over the long term, with the advantage more pronounced in recent years given the improved pricing environment from earlier years and continued focus on prudent risk selection. Strong operating results have benefited from workers' compensation reform legislation within both California and Florida, markets in which Zenith writes the majority of its premium. Although the reform legislation has resulted in a reduction in rates due to increased competition and lower loss costs, A.M. Best believes Zenith's prudent risk selection and proven market position provide an ongoing competitive advantage, which should enable the group to sustain solid operating results and strong capital over the near term.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit
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Publication:Business Wire
Date:Apr 4, 2008
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