Fitch put Zenith on watch

Fitch Ratings said it placed Zenith National Insurance Corp.'s BBB+ issuer default rating and Zenith National Insurance Capital Trust I's BB+ $58.5 million 8.55% trust preferred securities due Aug. 1, 2028 on Rating Watch negative following the announcement of the company's planned merger with Fairfax Financial Holdings Ltd.

While Fitch expects Zenith's operations to be minimally affected by the acquisition under Fairfax's decentralized management approach, investment management will be centralized at Fairfax.

The agency said the Rating Watch reflects its concerns regarding Fairfax's more opportunistic investment philosophy, as Fitch expects a gradual migration toward a riskier investment profile for Zenith. Additionally, Zenith continues to face headwinds in the workers' compensation market primarily due to recessionary pressures, Fitch said.

Zenith's current ratings reflect solid capitalization, strong underwriting results, conservative reserving practices and a strong balance sheet with low financial leverage and high-quality investment assets, the agency said.

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