Workers' Comp Carrier Hits Its Zenith With Income, Dividends

WALL STREET WEST

The state's $29 billion workers' compensation market may be unfriendly for many carriers, but Zenith National Insurance Corp. appears to have it figured out.

After riding out some rough times early last year when it was forced to tap a short-term line of credit to bolster its claims surplus, the Woodland Hills-based company is now basking in an enviable financial performance.

The company reported its fourth straight quarter of profits earlier this month, posting net income of $20.8 million in the fourth quarter ended Dec. 31, compared with a loss of $7.8 million for the like period a year earlier.

For all of 2003, Zenith reported net income of $67 million, up from $10.2 million for 2002, when nearly all its profits came from selling a Las Vegas homebuilding business.

The improved results prompted the company's board to up its quarterly dividend by 3 cents, to 28 cents a share, the first increase since 1991.

After the dividend hike was announced on Feb. 11, Zenith's stock rose 55 cents to $37.30, setting a new 52-week high. A year ago, it was trading below $20.

And earlier this month, Moody's Investor Service upgraded its ratings outlook on Zenith to stable from negative, while leaving its rating on the firm's senior unsecured debt at Ba1 and its overall financial strength to Baa1.

Meanwhile, Zenith unsealed this month what it called the industry's first-ever civil fraud case against a medical practitioner, using a provision of the insurance code that allows for treble damages.

The company is seeking damages of more than $24 million against Bristol Medical Clinic, its owner and other defendants, accusing it of overbilling Zenith for the care of 137 workers with mostly minor injuries. An employee at the Santa Ana clinic said no one was available for comment.

Insurance Commissioner John Garamendi has called widespread fraud a major problem in the California workers' compensation market.

Laurence Darmiento

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