S&P, Moody's Rate Zenith Senior Notes
NU Online News Service, March 24, 1:17 p.m. EST?Standard & Poor's Ratings Services announced its "double-b-plus" rating for Zenith National Insurance Corporation's newly issued convertible senior notes worth $110 million. Moody's Investors Service also assigned a rating for Zenith's new senior notes of "Ba1″.
Additionally, S&P also affirmed its "triple-b-plus" counterparty credit and financial strength ratings on Zenith's two operating subsidiaries, Zenith Insurance Co. and ZNAT Insurance Co., while keeping its "negative" outlook.
Moody's also affirmed its insurance financial strength rating for Zenith's property and casualty affiliates, which currently stands at "Baa1″, as well as its "Ba2″ rating on Zenith's preferred securities. Moody's ratings also continue to carry a "negative" outlook.
S&P said it established a "negative" outlook for all Zenith ratings last month, when the company strengthened its reserves by $30 million. The reserve-strengthening resulted in a fourth-quarter operating loss for the company, S&P noted.
But despite the outlook, Zenith appears poised to book improved overall results in 2003 as much better pricing in its two main states outpaces loss costs, S&P said.
Moody's also explained that its rating outlook for Zenith changed to "negative" from "stable" after the company's fourth-quarter 2002 reserve charge. "This action reflected concern that Zenith's earnings and capital generation could continue to be impacted by higher-than-anticipated medical inflationary trends," Moody's stated.
But Moody's added its ratings and outlook could stabilize following "sustained earnings improvements and organic capital generation" that would control operating leverage, moderate financial leverage and improve financial flexibility.
Zenith writes workers' comp insurance in 45 states, but mainly in California and Florida. It also has a smaller book of assumed reinsurance of worldwide property losses from catastrophes and large individual risks.
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