A.M. Best Affirms FSR for Zenith National Insurance Group

February 6, 2004

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of California-based Zenith National Insurance Group (Zenith). The rating applies to three intercompany pool members and is based on the consolidated operating performance and financial condition of the three insurers.

Additionally, A.M. Best has affirmed the “bbb-” senior debt rating on existing convertible notes issued by Zenith National Insurance Corp. (Zenith National), and the “bb” subordinated debt rating on existing capital securities issued by Zenith National Insurance Capital Trust I, a subsidiary of Zenith National. The outlook for all ratings is stable.

The rating reflects Zenith’s disciplined approach to pricing and underwriting, which has consistently produced an accident year loss ratio advantage for the group in its primary line, workers’ compensation. The group also benefits from the financial strength and flexibility of Zenith National, with $2.0 billion in total assets and $361 million in shareholders’ equity at Sept. 30, 2003.

Partially offsetting these positive rating factors is Zenith’s poor operating results from 1999-2001 due to increased losses in its assumed reinsurance business and lower-than-historical workers’ comp earnings, reflective of the adverse industry pricing environment.

Given the firming market conditions in recent years, operating results are expected to improve at least through 2004. As premium grows, A.M. Best looks for management to continue its ongoing commitment to appropriately capitalize the insurance subsidiaries commensurate with the financial strength rating.

The following debt ratings have been affirmed:

Zenith National Insurance Corporation–

“bbb-” on the $125.0 million 5.75% convertible senior notes, due 2023
Zenith National Insurance Capital Trust I–

“bb” on the $75.0 million 8.55% capital securities, due 2028
The financial strength rating of A- (Excellent) has been affirmed for the following intercompany pool members of Zenith National Insurance Group:

Zenith Insurance Company
Zenith Star Insurance Company
ZNAT Insurance Company

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