S&P’s Assigns Zenith National Ins. ‘BB+’ Rating

March 21, 2003

Standard & Poor’s Ratings Services said today that it assigned its ‘BB+’ rating to Zenith National Insurance Corp.’s (Zenith) $110 million 5.75 percent convertible senior notes due 2023, expected to be issued on March 21, 2003.

In addition, S&P’s also affirmed its ‘BBB+’ counterparty credit and financial strength ratings on Zenith’s two operating subsidiaries, Zenith Insurance Co. (ZIC) and ZNAT Insurance Co.

The outlook is negative.

“Proceeds of the issuance will be used for contribution of capital to Zenith’s insurance subsidiaries, retiring of bank debt, and other corporate purposes,” said S&P’s credit analyst Charles Titterton.

S&P’s established a negative outlook for all Zenith ratings on Feb. 5, 2003, 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.

Despite the outlook, Zenith appears poised to book improved overall results in 2003 as much better pricing in its two main states outpaces growth in loss costs. S&P’s met with management on March 6, 2003, and is in the process of its normal annual review of Zenith’s ratings. It is possible that on completion of the review the negative outlook will be removed.

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