The ongoing financial crisis is leaving virtually no companies unscathed.
Zenith National Insurance Corp., a healthy Woodland Hills-based workers’ compensation insurance provider, said its investment portfolio has taken a hit of roughly $65 million as a result of its exposure to an array of troubled financial firms.
What’s more, the company expects to incur a third quarter impairment charge due to its stakes in failed investment banking firm Lehman Brothers Holdings Inc. and insurance giant American International Group Inc.
From June 30 to Sept. 19, the fair value of Zenith’s investment portfolio fell 3 percent to $2.1 billion. Most of the losses stemmed from investments in Lehman, AIG, Citigroup Inc., Goldman Sachs Group Inc., Merrill Lynch & Co. Inc., Morgan Stanley and Wachovia Bank.
However, only Zenith’s $9.5 million loss in Lehman, which filed for bankruptcy, and its $4.8 million loss in AIG, whose stock was severely diluted by its $85 billion government bailout, will be reflected in the quarterly charge. The remaining holdings represent only paper losses.
“The unrealized losses on fixed-income investments are not material to our operations due to our strong capital and liquidity. We have the ability and intent to hold these investments for the long term,” the company said in a statement.
Zenith added that it would “continue to assess individual securities for impairments” if the unrealized losses continue for six months or more.
Robert Paun, an analyst with Sidoti & Co., said the impact on Zenith should be relatively low since the company has steered clear of toxic assets, such as mortgage-backed securities, and has a conservative investment portfolio.
“They haven’t been immune to the financial crisis, but at the same time I don’t think it’s too big of a deal,” he said.
Zenith, which has been profitable for years, reported second quarter net income of $28.4 million on revenues of $174 million. However, it has been taking a hit in the markets, with shares now off about one-third from their 52-week high of $46.45 in October 2007. Analysts, though, are generally bullish on the company, with the four who track its stock rating it either a “buy” or “outperform.” Target prices range from $42 to $48.
Bill Owen, Zenith’s senior vice president of investor relations, said the investment losses will not prompt the company to seek a premium rate hike.
Asset Seller
George Smith Partners Inc. thinks it has the answer for unloading commercial real estate owned properties building up on bank balance sheets.
The Los Angeles-based real estate investment banking firm has formed a group aimed at linking lenders and potential buyers with access to capital. The bank said it plans to leverage its long list of contacts among lenders and investors with its new Lender Services Group.
“In recent months, GSP has been inundated with requests from investors and institutions seeking note acquisition and REO opportunities,” said Craig Hamilton, senior vice president of the firm, in a statement.
George Smith Partners, founded in 1992, has handled billions of dollars in real estate transaction in Southern California.
New Branch
Center Bank, a subsidiary of Los Angeles-based Center Financial Corp., has opened a full-service flagship branch in Koreatown.
The company has dubbed the office a “concept branch,” offering amenities such as high-tech teller machines and advanced ATMs that provide depositors with image copies of their deposits.
“This branch is the first of its kind in the Korean-American banking community and demonstrates our efforts to provide more convenient access to our services,” said Jae Whan Yoo, the company’s chief executive, in a statement.
Founded in 1986, Center Financial has $2.1 billion in assets and operates 25 branches located primarily in Southern California.
Comings and Goings
The board of Community Bank, a Pasadena-based commercial bank with $2.3 billion in assets, has appointed David Malone chief executive and Kent Stevens chief credit officer. Bel Air Investment Advisors LLC, a Los Angeles-based wealth management firm, has hired Michael Miller as managing director and Josh Markman as a vice president. Wells Fargo Insurance Services Inc., a subsidiary of Wells Fargo & Co., has appointed Alan Boring a senior vice president for the Southern California region, based in Sherman Oaks.
Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.
