Zenith National Insurance Corp
Zenith National Insurance — Investor Presentation (November 2004)
21 slides from Zenith National Insurance's investor presentation, Nov 17, 2004
Slide 1: Zenith National Insurance
ameZenith — >; November 17, 2004
Slide 2: Cautionary statement
- Cautionary statement = Private Securities Litigation Reform Act Safe Harbor Statement The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements if accompanied by meaningful cautionary statements identifying important factors that could cause actual
Slide 3: Management team
Management neam Industry Executive Title Experience Stanley Zax Chairman, President and CEO 32 years Jack Miller Executive Vice President and President 32 years and COO of Zenith Insurance Company Robert Meyer Senior Vice President and Actuary 31 years William Owen Senior Vice President and CFO 18 y
Slide 4: Highlights
Highlights @ Workers’ compensation specialist — focused strategy @ Attractive workers’ compensation operating environment y benefiting both premiums and|loss costs: » positive impact of recent California workers’ compensation reform @ Consistent underwriting outperformance over the long term » under
Slide 5: Who We Are
WholWe Are = Aspecialty insurer focused on the workers’ compensation market y 32% of 2003 netpremiums eamed, 95% of the first 9 months of 2004 net premiums eamed, y key states are California and Florida (69% and 17% of net workers compensation premiums eared in 2004, respectively) = Workers’ compens
Slide 6: Key Strengths
key strengins M Specialized knowledge of California and Florida markets ) provides underwriting and claims-management advantage | Positioned for attractive returns from favorable market conditions = Current loss reserve estimates are conservative @ Long-standing service strategy attracts agents and
Slide 7: Overview of Business Mix
Slide 8: Zenith Outperforms California Industry for Years
sam a DE = Zenith Outperiorms California Industry for 25 Years Note-Alligures exclude lose adjustment expenses: (Industy data from te Wokers Compensation Insurance Rating Buweav of Calforna CWWCIRET, TheZenith
Slide 9: California Workers' Compensation Reform
— eee Se ~ California Workers Compensation Reform @ Ambitious overhaul of California workers’ compensation system: @ Major legislative reforms enacted|in September 2003 and April, 2004 » aimed at reducing costs and improving fairness in the system y expected to improve trend of cost increases over t
Slide 10: Reduction in Total Cost
Reduction in Total Cost Reform of Benefits Elimination of Vocational Rehabilitation (6%) Outpatient Surgery Center Fees (4% Limits on Chiropractors and Physical Therapists (4% Limits on Temporary Disability Apportionment of Permanent disability Medical Treatment Guidelines, Elimination of Treating P
Slide 11: Drivers of Improved Profitability
Drivers of Improved| Protitability California Workers’ Compensation lf Price increases are outpacing increases in exposure Zenith Annual Percent Change _ Earned Covered Premiums — Payroll = 2000 29% 13% 2001 50% 19% 2002 45% 12% 2003 70% 15% [Average 48% 15% 2004 (9 months) 42% 21%
Slide 12: Claims are Paid Over Time
Claims are Paid Over Time @ There is time available for reform legislation to have a favorable impact 24% 2004 2005 2006 2007 2008 2009 2010 2011 2012 Estimated Cumulative Paid Losses for11% 35% 56% 70% 80% 86% 89% 92% 94% 2004 claims TheZenith 12
Slide 13: Assumptions Used in Loss Reserve Estimate
— Assumptions UsediIn Loss Reserve Estimate & Conservative posture taken in setting pricing and establishing, reserves & Anticipates loss cost inflation through duration of claims [ ae Accident = 9 21 33 co Year months months months __months Pcie vn ve 1998 18%} 1% 9% 1999 17h 11 14% 17% 16% 200 (Jk
Slide 14: Managing Catastrophic Risk
Managing Catastrophic Risk & Workers’ Compensation: y Aided by focus on middle-market clients who are spread over a’ diversity of low-profile industries ) losses in excess of $1.0 million are reinsured up to $150.0 million, except that we retain 1/3 of any loss between $75.0 million and| $150.0 mill
Slide 15: Financial Summary
Financial Summary
Slide 16: GAAP Financial Summary
GAAP Financial summary (inmillions, except per share data) Net Premiums Earned: Workers’ Compensation Reinsurance Combined Ratios: Workers’ Compensation Reinsurance Net Investment Income. Net Income Diluted Net Income per Share’? 2002 $503.9 So 108.7% 85.6 $48.8 $10.2 $0.54 2003 $7128 61.0 95.9% 843
Slide 17: GAAP Financial Summary
GAAP Financial summary (inmillions, except per share data) 9130103 Net Premiums Earned: Workers’ Compensation $512.4 Reinsurance 415 Combined Ratios: Workers’ Compensation 98.8% Reinsurance 854 NetInvestment Income $41.9 NetIncorne $48.2 Diluted Netincame Per Share? $2.45 9 months 930104 $862.2 342
Slide 18: Balance Sheet Highlights
Balance Sheet Highlights (inmillions, except per share data) ® Financial position supports market opportunities December 31, September 30, 2002 2008 2004 Investments and Cash $1,157 $1,538.5 $1,794.0 Total Assets 1615.4 2,023,7 2327.8 Unpaid Losses & LAE 1,041.5 4.2207 14249 Uneamed Premiums 97.4 11
Slide 19: High Quality Investment Portfolio
Hig Quality Investment Portfolio At September 30, 2004 Mortgage Loans 1% Equity Securities —~ 5% TheZenith Investment in Shortterm Advent Investments Capital 224% Fixed Maturity 69% Total = $1.8 billion Other 1% Conservative investment posture Average maturity of 6.5 years {excluding short-term: inv
Slide 20: Highlights
Highlights @ Workers’ compensation specialist — focused strategy = Attractive workers’ compensation operating environment @ Consistent underwriting outperformance over the long term = Spread of risk — 42,600 policies in 45 states @ Loss reserve adequacy and transparency = High quality and liquid inv
Slide 21: Searchable text section of graphics shown above
Searchable text section of graphics shown above [ LOG O] November 17, 2004 Cau tionary Statement Private Securities Litigation Reform Act Safe Harbor Statement The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements if accompanied by meaningful caut
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