Zenith National Unveils Q3 Report

California-based Zenith National Insurance Corp. reported net income of $25.4 million for the third quarter of 2004 compared to net income of $16.1 million for the third quarter of 2003.

Net income for the nine months ended Sept. 30, 2004 was $75.3 million compared to net income for the nine months ended Sept. 30, 2003 of $46.2 million. Catastrophe losses after tax of $12.0 million, or $0.49 per diluted share, reduced net income in the third quarter and nine months ended September 30, 2004.

Diluted net income per share was $1.09 and $3.24 for the third quarter of 2004 and nine months ended Sept. 30, 2004, respectively. Diluted net income per share for the third quarter of 2004 and the nine months ended Sept. 30, 2004 reflect the impact of additional shares issuable as a result of the convertibility of Zenith’s 5.75% Convertible Senior Notes due 2023 (the “Convertible Notes”). Diluted net income per share was $0.85 and $2.45 for the third quarter of 2003 and nine months ended Sept. 30, 2003, respectively. If the Convertible Notes had been convertible in the third quarter of 2003 and in the nine months ended Sept. 30, 2003, diluted net income per share for the periods would have been $0.72 and $2.05, respectively.

Income from the workers’ compensation segment before tax for the three and nine months ended Sept. 30, 2004 was $29.5 million and $71.4 million, respectively, compared to $8.4 million and $16.4 million, respectively, for the three and nine months ended Sept. 30, 2003. Loss before tax from the reinsurance segment for the three and nine months ended Sept. 30, 2004 was $15.8 million and $11.3 million, respectively, compared to income before tax of $2.5 million and $6.9 million, respectively, for the three and nine months ended Sept. 30, 2003.

The loss from the reinsurance segment in 2004 includes estimated catastrophe losses from Hurricanes Charley, Frances, Ivan and Jeanne of $18.5 million ($12.0 million after tax, or $0.49 per diluted share). Income or loss from the workers’ comp and reinsurance segments do not include any investment income.

Workers’ comp net premiums earned increased approximately 23% and 29% in the three and nine months ended Sept. 30, 2004, respectively, compared to the corresponding periods of 2003. In California, workers’ comp net premiums earned increased approximately 31% and 41% in the three and nine months ended Sept. 30, 2004, respectively, compared to the corresponding periods of 2003.

The combined ratio for the workers’ comp segment for the nine months ended Sept. 30, 2004 was 89.2% compared to 96.8% for the nine months ended Sept. 30, 2003 and 95.9% for the year ended Dec. 31, 2003. The combined ratio for the reinsurance segment for the nine months ended Sept. 30, 2004 was 133.0% compared to 85.4% for the nine months ended Sept. 30, 2003 and 84.3% for the year ended Dec. 31, 2003.

Consolidated net cash flow from operating activities was $252.2 million for the nine months ended Sept. 30, 2004 compared to $179.4 million for the nine months ended Sept. 30, 2003. Consolidated stockholders’ equity per share at Sept. 30, 2004, June 30, 2004, March 31, 2004 and Dec. 31, 2003 was $23.82, $21.81, $22.05 and $20.27, respectively. Return on average equity in the nine months ended Sept. 30, 2004 was 23.8% compared to 18.1% in the corresponding period of 2003.