A.M. Best Upgrades Ratings of Zenith National Insurance Group and Zenith National Insurance Corp

Business Wire, April 18, 2007

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) of Zenith National Insurance Group and its members, Zenith Insurance Company (Zenith) and ZNAT Insurance Company (ZNAT), a wholly owned subsidiary of Zenith. Both Zenith and ZNAT operate as subsidiaries of their publicly traded parent, Zenith National Insurance Corp. (Zenith National) [NYSE: ZNT]. The rating is based on the consolidated operating performance and financial condition of the two insurers.

Concurrently, A.M. Best has upgraded the issuer credit ratings (ICR) to "a" from "a-" of Zenith National Insurance Group and to "bbb" from "bbb-" of Zenith National. A.M Best has also upgraded the debt ratings to "bbb" from "bbb-" on $1.15 million 5.75% convertible senior unsecured notes, due 2023 of Zenith National and to "bb " from "bb" on $58.5 million 8.55% capital securities, due 2028 of Zenith National Insurance Capital Trust I. All companies are domiciled in Woodland Hills, CA. The outlook for all ratings is stable.

The ratings reflect Zenith's excellent capitalization, strong operating performance and disciplined approach to pricing and underwriting risks, which has consistently produced a significant accident year loss ratio advantage for the group within its primary line, workers' compensation. The group also benefits from the financial flexibility of Zenith National, which provides access to capital as needed.

Partially offsetting these positive rating factors is the prior year reserve development, which impacted earlier accident years, partially attributable to increased losses within its assumed reinsurance business, which the group exited in 2005, as well as the competitive pricing environment of the late 1990s and the resulting impact on workers' compensation results. Despite these concerns, the outlook recognizes the consistent improvement in underwriting performance and demonstrated solid underwriting experience that the workers' compensation line has had over market cycles.

Zenith has demonstrated a significant loss ratio advantage within the workers' compensation line over the long term, benefiting from an improved pricing environment from earlier years and continued focus on prudent risk selection. In addition, the group's strong operating results reflect the beneficial impact of workers' compensation reform legislation within both California and Florida, markets in which the group writes the majority of its premium. Although the reform legislation has resulted in an increase in market participants in combination with a reduction in rates, A.M. Best believes Zenith remains better positioned than most other carriers to benefit from the improved conditions within the California and Florida workers' compensation markets.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.