Fitch upgrades Zenith National Insurance

Fitch Ratings said it upgraded Zenith National Insurance Corp.'s issuer default rating to BBB+ from BBB, $1.2 million 5.75% convertible senior notes due 2023 to BBB from BBB-, the rating of Zenith National Insurance Capital Trust I's securities to BBB- from BB+ and the insurer financial strength ratings of Zenith National Zenith Insurance Co. and ZNAT Insurance Co. to A from A-.

The outlook is stable.

Fitch said the upgrade reflects Zenith's improved profitability profile, as evidenced by better-than-expected workers' compensation underwriting results over the last several years, and the company's improved operating profile as a result of its recent exit from the reinsurance business. The agency said it views this decision favorably, given the inherent volatility of reinsurance and the recent poor underwriting performance due to sizable hurricane losses in the last two years.

The ratings reflect Zenith's disciplined underwriting focus and strong capitalization, Fitch said. Partially offsetting these positives are business line and geographical concentration risks, with a heavy concentration in the competitive California and Florida workers' compensation markets, and significant underwriting losses over the 1997 to 2002 period.

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