Moody's upgrades Zenith National Insurance

Moody's Investors Service said it upgraded Zenith National Insurance Corp.'s senior debt rating to Baa3 from Ba1 and subordinated debt rating to Ba1 from Ba2 and the insurance financial strength ratings of Zenith's insurance subsidiaries to A3 from Baa1. The outlook is stable.

The agency said the upgrade was prompted by Zenith's strong operating performance and capital growth over the past few years and by the recent reduction in financial leverage attributable to the conversion of $124 million in convertible debt into equity in 2005.

Zenith's credit strengths include its demonstrated track record of underwriting discipline and opportunistic growth strategy, a focus on profitability over revenue growth, its reasonable financial flexibility, a high-quality investment portfolio and good liquidity, Moody's said.

These fundamental strengths are tempered by Zenith's concentration in the difficult and volatile workers' compensation and property reinsurance lines of business and by the regulatory and competitive risks associated with writing the majority of its business in California and Florida, the agency said.

Moody's predicted that Zenith will maintain financial leverage below 20%.

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