<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 28, 1995
Commission file number 1-9627
ZENITH NATIONAL INSURANCE CORP.
[Exact name of registrant as specified in its charter]
DELAWARE 95-2702776
[State or other jurisdiction of [I.R.S. Employer
incorporation or organization] identification No.]
21255 Califa Street, Woodland Hills, California 91367-5021
[Address of principal executive offices] [Zip Code]
Registrant's telephone number, including area code: [818] 713-1000
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
As previously reported, on October 6, 1995, Zenith National Insurance Corp.
("Zenith") and Anchor National Life Insurance Company ("Anchor"), a wholly-owned
subsidiary of SunAmerica, Inc., entered into a Stock Acquisition Agreement dated
September 19, 1995 (the "Agreement") pursuant to which Zenith agreed to sell to
Anchor, or a designated affiliate of Anchor, all of the issued and outstanding
capital stock of CalFarm Life Insurance Company ("CalFarm Life") for $120
million in cash. Anchor designated SunAmerica Life Insurance Company as the
affiliate to purchase CalFarm Life. The closing (the "Closing") of this
transaction occurred on December 28, 1995.
Prior to the Closing, certain assets of CalFarm Life were transferred to CalFarm
Insurance Company ("CalFarm Insurance"), a wholly owned subsidiary of Zenith.
These assets included CalFarm Life's group health insurance business, its
subsidiary, CalFarm Properties, Inc., its shares of common and preferred stock
of Delta Life Corporation and certain real estate and personal property. In
addition, prior to the Closing CalFarm Life paid a cash dividend to Zenith of
$500,000. For a fee, CalFarm Insurance has agreed to continue to provide
administrative services to CalFarm Life for a period of time not to exceed 6
months.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro forma financial information
The following unaudited pro forma condensed consolidated balance sheet of Zenith
at September 30, 1995 reflects the sale of CalFarm Life, excluding the health
operations and other assets which Zenith is retaining, as if the sale occurred
on that date. The pro forma condensed consolidated statements of operations for
the year ended December 31, 1994 and nine months ended September 30, 1995
present Zenith's continuing operations assuming the sale had occurred on
January 1, 1994.
The pro forma information is based upon the historical statements of Zenith
and reflect all material adjustments necessary to reflect the foregoing
assumptions.
The pro forma financial information is not necessarily indicative of the results
which actually would have occurred for the periods presented if the sale had
occurred on the dates indicated, nor is it indicative of results which may be
obtained in the future. The pro forma financial information should be read in
conjunction with the Financial Statements included in Item 8 of Zenith's 1994
Form 10-K.
(c) Exhibits
2.1 Amendment No. 1 to Stock Acquisition Agreement, dated as of
December 27, 1995, by and among Anchor National Life Insurance
Company, SunAmerica Life Insurance Company and Zenith National
Insurance Corp.
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Condensed Consolidated Pro Forma Balance Sheet (Unaudited)
Zenith National Insurance Corp.
September 30, 1995
<TABLE>
<CAPTION>
Pro Forma
(Amounts in thousands) Historical (a) Adjustments Pro Forma
-------------- ------------ ------------
<S> <C> <C> <C>
Assets
Investments
Fixed maturities $ 596,504 $ 596,504
Other investments 141,422 141,422
-------------- ------------ ------------
Total investments 737,926 737,926
Cash 8,070 $ 113,433 (b) 121,503
Premiums receivable 83,318 83,318
Receivable from reinsurers and prepaid reinsurance premiums 58,723 58,723
Properties and equipment, less accumulated depreciation 48,721 48,721
Federal income taxes 15,860 5,600 (b) 21,460
Other assets 70,651 70,651
Net assets of discontinued operations held for sale 119,033 (119,033) (b)
-------------- ------------ ------------
Total Assets $ 1,142,302 $ 1,142,302
-------------- ------------ ------------
-------------- ------------ ------------
Liabilities
Policy liabilities and accruals
Unpaid losses and loss expenses $ 505,378 $ 505,378
Unearned premiums 139,391 139,391
Senior notes payable, less unamortized issue costs 74,202 74,202
Other liabilities 96,800 96,800
-------------- ------------
Total Liabilities 815,771 815,771
-------------- ------------
Stockholders' Equity
Preferred stock, none issued and outstanding
Common stock 24,180 24,180
Additional paid-in capital 253,969 253,969
Retained earnings 158,794 158,794
Net unrealized appreciation on investments, net of deferred taxes 1,663 1,663
-------------- ------------
438,606 438,606
Less treasury stock (112,075) (112,075)
-------------- ------------
Total Stockholders' Equity 326,531 326,531
-------------- ------------
Total Liabilities and Stockholders' Equity $ 1,142,302 $ 1,142,302
-------------- ------------
-------------- ------------
</TABLE>
____________________
(a) Historical information is as previously published in Zenith's Report on Form
10-Q for the period ended September 30, 1995 and reflects the estimated impact
of the pending sale of CalFarm Life through discontinued operations.
(b) To record the receipt of net proceeds on the sale of CalFarm Life.
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Condensed Consolidated Pro Forma Statement of Operations (Unaudited)
Zenith National Insurance Corp.
For the Nine Months Ended September 30, 1995
<TABLE>
<CAPTION>
Pro Forma
(Amounts in thousands, except per share data) Historical (c) Adjustments (d) Pro Forma
-------------- ---------------- ------------
<S> <C> <C> <C>
Consolidated Revenues
Property and casualty premium income $ 321,899 $ 321,899
Net investment income 34,750 34,750
Real estate sales 28,952 28,952
Other income 2,727 2,727
-------------- ------------ ------------
Total Revenues 388,328 388,328
Expenses
Property and casualty losses and loss expenses incurred 233,936 233,936
Policy acquisition costs 57,559 57,559
Other underwriting and operating expenses 34,064 34,064
Real estate construction costs 27,170 27,170
Other expenses 9,150 9,150
-------------- ------------ ------------
Total Expenses 361,879 361,879
-------------- ------------ ------------
Income from continuing operations before federal income tax 26,449 26,449
Federal income tax 8,580 8,580
-------------- ------------ ------------
Income from continuing operations $ 17,869 $ 17,869
-------------- ------------ ------------
-------------- ------------ ------------
Earnings per share from continuing operations $ 0.97 $ 0.97
-------------- ------------
-------------- ------------
Weighted average number of shares of common stock 18,535 18,535
</TABLE>
____________________
(c) Historical information is as previously published in Zenith's Report on Form
10-Q for the period ended September 30, 1995 and reflects the estimated impact
of the pending sale of CalFarm Life through removing discontinued operations.
(d) No pro forma adjustments are required since the pending sale of CalFarm Life
was previously reflected as a discontinued operation on Zenith's Report on Form
10-Q for the period ended September 30, 1995. No interest has been imputed on
net proceeds of the sale which, under this assumption, would have been
received January 1, 1994.
Page 4
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Condensed Consolidated Pro Forma Statement of Operations (Unaudited)
Zenith National Insurance Corp.
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
Pro Forma
(Amounts in thousands, except per share data) Historical Adjustments(e) Pro Forma
------------ -------------- ------------
<S> <C> <C> <C>
Consolidated Revenues
Property and casualty premium income $ 401,925 $ 36,904 $ 438,829
Health and life premium income and other policy charges 61,270 (61,270)
Net investment income 98,042 (57,974) 40,068
Realized gains on investments 2,446 (1,018) 1,428
Real estate sales 30,220 30,220
Other income 1,210 700 1,910
------------ ------------ ------------
Total Revenues 595,113 (82,658) 512,455
Expenses
Property and casualty losses and loss expenses incurred 263,457 29,516 292,973
Health and life benefits and other policy credits 80,104 (80,104)
Policy acquisition costs 83,653 (9,554) 74,099
Other underwriting and operating expenses 57,548 (8,651) 48,897
Real estate construction costs 28,031 28,031
Other expenses 24,749 (1,400) 23,349
------------ ------------ ------------
Total Expenses 537,542 (70,193) 467,349
------------ ------------ ------------
Income before federal income tax 57,571 (12,465) 45,106
Federal income tax 19,671 (4,363) 15,308
------------ ------------ ------------
Net Income $ 37,900 $ (8,102) $ 29,798
------------ ------------ ------------
------------ ------------ ------------
Earnings per share $ 1.99 $ 1.56
------------ ------------
------------ ------------
Weighted average number of shares of common stock 19,090 19,090
</TABLE>
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(e)To reflect the elimination of the results of operations for 1994 for the Life
and Annuity operations of CalFarm Life and to reclassify the health insurance
operations of CalFarm Life to the Zenith property and casualty insurance
operation as if the sale had occurred on January 1, 1994. No interest has been
imputed on net proceeds of the sale which, under this assumption, would have
been received January 1, 1994.
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ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ZENITH NATIONAL INSURANCE CORP.
Registrant
Date: January 9, 1996 Stanley R. Zax
--------------------------------------------
Stanley R. Zax, Chairman of the Board
& President (Principal Executive Officer)
Fredricka Taubitz
--------------------------------------------
Date: January 9, 1996 Fredricka Taubitz, Executive Vice President
& Chief Financial Officer (Principal
Accounting Officer)
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AMENDMENT NO. 1 TO STOCK ACQUISITION AGREEMENT
This Amendment No. 1 to Stock Acquisition Agreement is made and
entered into as of December 27, 1995 by and among Anchor National Life Insurance
Company, a California corporation ("ANCHOR"), SunAmerica Life Insurance Company,
an Arizona corporation ("PURCHASER"), and Zenith National Insurance Corp., a
Delaware corporation ("SELLER"), with reference to that certain Stock
Acquisition Agreement (the "ACQUISITION AGREEMENT") dated as of September 19,
1995 by and between Anchor and Seller, and with reference to the following
facts:
Pursuant to the terms of the Acquisition Agreement, Anchor has
assigned its interest thereunder to Purchaser, as its Designated Affiliate (as
defined in the Acquisition Agreement). Section 13.7 of the Acquisition
Agreement provides that the Acquisition Agreement may be modified or amended
only by a writing duly executed by or on behalf of the parties thereto. Anchor,
Purchaser and Seller wish to amend the Acquisition Agreement as set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. AMENDMENTS TO THE ACQUISITION AGREEMENT.
(a) Section 3.15(h) of the Acquisition Agreement is hereby amended to
delete the following words from the beginning of the first sentence thereof
"Prior to the execution of this Agreement, the Seller has delivered . . ." and
to replace such words with the words "Prior to the Closing Date, the Seller will
have delivered . . .".
(b) Section 5.24 of the Acquisition Agreement is hereby amended and
restated as follows: "Prior to the Closing, the Seller shall provide the
Purchaser will access to all agency contracts of the Company and, within 5
Business Days after the earlier of the end of the period during which the Seller
provides services under the Services Agreement and the date of a written request
by the Purchaser, the Seller shall deliver to the Purchaser all such agency
contracts."
(c) Exhibit E attached to the Acquisition Agreement is hereby amended
and restated as attached hereto.
2. REFERENCE TO AND EFFECT ON THE ACQUISITION AGREEMENT.
(a) On and after the date hereof, each reference in the Acquisition
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference in the Acquisition Agreement to Exhibit E shall mean
and be reference to the Acquisition Agreement (including Exhibit E) as amended
by this Amendment No. 1.
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(b) Except as specifically amended by this Amendment No. 1, the
Acquisition Agreement shall remain in full force and effect and is hereby
ratified and confirmed.
(c) The execution, delivery and performance of this Amendment No. 1
shall not constitute a waiver of any provision of, or operate as a waiver of any
right, power or remedy of any party under, the Acquisition Agreement.
3. MISCELLANEOUS.
(a) This Amendment No. 1 may be executed in any number of
counterparts, each of which will be deemed on original, but all of which will
constitute one and the same instrument.
(b) This Amendment No. 1 shall be governed by and construed in
accordance with the laws of the State of California applicable to a contract
executed and performable in such state.
IN WITNESS WHEREOF, this Amendment No. 1 to Stock Acquisition
Agreement has been duly executed and delivered by the duly authorized officers
of Anchor, Purchaser and Seller, effective as of the date first written above.
SUNAMERICA LIFE INSURANCE COMPANY
By: ________________________________________
Name: Jay S. Wintrob
Title: Executive Vice President
ANCHOR NATIONAL INSURANCE COMPANY
By: ________________________________________
Name: Jay S. Wintrob
Title: Executive Vice President
ZENITH NATIONAL INSURANCE CORP.
By: ________________________________________
Name:
Title:
2
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EXHIBIT E
AGREEMENTS TO BE ASSIGNED
1. Lease Agreement, dated 2/15/87, between California Farm Bureau Federation
(as lessee) and CalFarm Insurance Company and the Company (as lessors) (re
building located at 1601 Exposition Boulevard), as amended 12/1/89 and
12/28/90.
2. License Agreement, dated 6/4/85, between CalFarm Insurance Company, CalFarm
Life Insurance Company, CalFarm Insurance Agency and Zenith National
Insurance Corp. and California Farm Bureau Federation for use of the Farm
Bureau name, logo and membership lists.
3. ClaimFacts TPA Perpetual License Agreement, dated 9/26/89, between ERISCO,
Inc. and the Company.
4. Agreement of Amendment, dated 8/29/90, between ERISCO, Inc. and the
Company.
5. Amendment to ClaimFacts TPA Perpetual License Agreement dated 9/29/94
between ERISCO and the Company for GroupFacts.
6. Retention Agreement, dated as of 7/1/93, between California Farm Bureau
Federation and the Company.
7. Amendment to Retention Agreement effective 11/1/94 between California Farm
Bureau and the Company.
8. Second Amendment to Retention Agreement between California Farm Bureau and
the Company effective 5/1/95.
9. License Agreement, dated 2/3/92, between Medical Data Research, a division
of Medicode, Inc. and the Company for data base lease (Anesthesia Payment
Guide).
10. Agreement between Medical Data Research, a division of Medicode, Inc. and
the Company for data base (Workers Compensation).
11. Agreement, dated 6/7/92, between Medical Data Research, a division of
Medicode, Inc. and the Company for data base (Medical or Dental UCR Payment
System).
12. Confidentiality Agreement, effective 1/13/88, between Community Care
Network and the Company.
13. Payor Agreement, dated 2/1/88, between Community Care Network and the
Company.
14. Participation and Indemnification Agreement, dated 3/19/93, executed by the
Company (re NHCAA).
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15. Agreement Regarding Adherence to Procedure Guidelines Governing
Participation of NHCAA Corporate Members in NHCAA Information Disclosure
Program, dated 2/24/93, executed by the Company.
16. Subscription Agreement for Life/Health Companies, dated 9/9/92, between
Index System and the Company.
17. Lazer Ventures Medical & Dental Training Software Maintenance Agreement,
dated 8/27/93, executed by the Company.
18. Agreement, dated 7/26/92, between CDB Infotek and the Company for
subscriber application and service.
19. Agreement dated 5/9/85 between D & B Computing Services and the Company.
MUST Software International (a Division of U3S Corporation of America) is
the successor in interest to D&B Computing Services, Inc.
20. Premium Administration Agreement effective May 1, 1995 between California
Farm Bureau and the Company.
21. Agreement dated September 1, 1985, as amended June 1, 1995 between PCS
Health Systems, Inc. and the Company.
22. Addendum dated January 1, 1995 to agreement between PCS Health Systems,
Inc. and the Company for managed mail.
23. PCS Recap System Underwriter Agreement, effective 9/1/91, between PCS
Health Systems Inc. and the Company (PCS RECAP SYSTEM).
24. Supplemental Recap System Agreement effective 11/13/89 between PCS, Inc.
and the Company (administration of Prescription Drug: RECAP SYSTEM).
25. SinglePoint Agreements:
a. Master Agreement effective May 1, 1995 among UNUM, Zenith Insurance
Company, and Company
b. Marketing and Administration Agreement effective May 1, 1995 among
UNUM, Zenith Insurance Company, SP Administrator and Company
c. Marketing and Administration Agreement effective May 1, 1995 among
UNUM, Zenith Insurance Company, Sharp and the Company
d. Service Mark License Agreement effective May 11, 1995, among
SinglePoint, LLC; SP Administrator, LLC; UNUM; Zenith Insurance
Company; and the Company
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e. Agreement dated 7/6/95 between Harden and Company and the Company for
Underwriting Services
f. Confidentiality Agreement dated 6/23/95 between Anchor Pacific
Underwriting, Inc., and the Company
g. Group Medical Reinsurance Agreement effective 5/1/95 between UNUM and
the Company
h. Letter of Intent dated 9/11/95 between OMNI Health Care; Zenith
Insurance Company; UNUM; SP Administrator, LLC; and the Company
i. Letter of Intent, dated September 20, 1995, among Zenith National
Insurance Corp., UNUM, Omni Health Care, Sutter Ambulatory Care
Corporation and CalFarm Life Insurance Company.
26. Group Dental Reinsurance Agreement dated April 17, 1995 between Ameritas
Life and the Company
27. Medical Excess Loss Reinsurance Treaty effective May 1, 1995, between
American Accident Reinsurance Group (Duncanson & Holt) and the Company
28. Excess Major Medical Reinsurance Agreement, effective 1/1/93 between
Employers Reinsurance Corporation and the Company, and all amendments
thereto (active for new business)
29. Federal Service Mark Application for the Mark SINGLEPOINT dated November 8,
1994 under serial number 74/595,791.
30. Federal Service Mark Application for the Mark SINGLEPOINT and design dated
February 6, 1995 under serial number 74/630,030.
31. Membership in ClaimFacts users group.
32. License Agreement with TLC for Freedom Software Packages.
33. Marketing and Administration Agreement, dated November 13, 1995, between
Ameritas Managed Dental Plan, Inc. and CalFarm Life Insurance Company.
34. Marketing and Administration Agreement, dated November 13, 1995, between
Ameritas Life Insurance Company and CalFarm Life Insurance Company.
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