Zenith, Betters Days Ahead in California
By Robert Warne - March 21, 2003There’s been a fair share of chatter about Zenith National Insurance Corp. coming from the rating agencies this past week.
The buzz has been prompted by its $110 million private offering of convertible senior notes to pay-off $45 million in short-term bank debt and to be used for other corporate purposes like surplus infusions.
This action gave the rating agencies an opportunity to not only rate the notes but also give their outlook for the corporation and its subsidiaries.
Fitch revised its A- stable rating for Zenith’s insurance subsidiaries to A- negative.
The negative rating is tied to the company’s workers’ compensation business in California. The agency credits Zenith for its prime position to capitalize on California’s hard market from rising premium rates. But Fitch is concerned that these positives could be overcome by medical inflation and increasing claims severity trends.
after management strengthened company-wide reserves by $30 million and, by this action, generated a fourth-quarter operating loss for the organization. The outlook stemmed from the action itself and from stiff increases in both medical and indemnity costs in California.
But despite the negative outlook, Zenith appears poised to book improved overall results in 2003 as much better pricing in California outpaces growth in loss costs.
AM Best likes Zenith’s disciplined approach to pricing and underwriting. The agency also likes its conservative operating philosophy and believes the insurer is set to benefit from its position in California, despite recent results. | 
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