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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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): JULY 9, 1998 COMMISSION FILE
NUMBER: 1-9627
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ZENITH NATIONAL INSURANCE CORP.
(Exact name of Registrant as specified in its Charter)
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DELAWARE 95-2702776
(State or Other (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
21255 CALIFA STREET,
WOODLAND HILLS, CA
(Address of principal 91367-5021
executive offices) (Zip Code)
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Registrant's telephone number, including area code: (818) 713-1000
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On April 1, 1998, pursuant to the Asset Purchase Agreement between Zenith
Insurance Company, a wholly owned subsidiary of the Registrant ("Zenith
Insurance"), and RISCORP Inc. and certain of its subsidiaries (collectively,
"RISCORP"), Zenith Insurance acquired substantially all of the assets and
certain liabilities of RISCORP related to RISCORP's workers' compensation
business. At the closing, Zenith Insurance paid RISCORP $35 million in cash. The
final purchase price, which will take into account the amount already paid, is
not yet known, is subject to a determination process, and will be equal to the
excess of the value of the transferred assets over the value of the transferred
liabilities as of April 1, 1998, each determined in accordance with generally
accepted accounting and actuarial principles.
The Asset Purchase Agreement provides a three-step process for determination
of the final purchase price. As the first step of this process, on June 9, 1998,
RISCORP provided Zenith Insurance with a "Proposed Business Balance Sheet"
indicating that RISCORP's determination of the final purchase price is
approximately $141 million. As the second step of this process, on July 9, 1998,
Zenith Insurance provided RISCORP with proposed adjustments, prepared in
conjunction with Zenith Insurance's external accounting and actuarial
consultants, to the Proposed Business Balance Sheet. These proposed adjustments,
which may change after discussions with RISCORP, result in large part from
differences in the estimation of losses and loss adjustment expense reserves,
primarily related to differences in actuarial methodology and assumptions,
including anticipated loss development. If upheld in the final step of the price
determination process, these adjustments would suggest in the aggregate that the
value of the liabilities assumed by Zenith Insurance exceeds the value of the
assets transferred to Zenith Insurance by as much as $68 million, and that the
final purchase price will be no greater than the $35 million already paid by
Zenith Insurance at closing.
If Zenith Insurance and RISCORP are unable to reach agreement on the
adjustments proposed by Zenith Insurance, the Asset Purchase Agreement requires,
as the final step of the price determination process, that all items in dispute
be submitted to a neutral auditor and a neutral actuary who are to act as
experts and not as arbitrators to resolve such dispute. Zenith Insurance cannot
predict the outcome of this price determination process and, therefore, the
final purchase price at this time.
Zenith Insurance has provided notice to RISCORP of certain breaches of
representations, warranties and covenants made by RISCORP in the Asset Purchase
Agreement. These breaches may result in recovery by Zenith Insurance of a
portion of the purchase price otherwise payable by Zenith Insurance. In
addition, Zenith Insurance believes it is entitled to receive certain assets of
RISCORP, including security deposits held by state insurance departments, that
were not transferred to Zenith Insurance at closing.
Zenith Insurance is considering the purchase of ceded reinsurance protection
relating to development of the losses and loss adjustment expense reserves
assumed from RISCORP. No assurance can be given that Zenith Insurance will be
able to obtain such reinsurance on terms and conditions that are acceptable to
it.
NOTE ON FORWARD-LOOKING INFORMATION
This report contains statements that constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended. The words
"believe," "estimate," "expect," "intend," "anticipate," and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speak only as of the dates on which they were made. The Registrant
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those indicated in the forward-looking
statements as a result of various factors. Readers are cautioned not to place
undue reliance on these forward-looking statements, which are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those projected. These risks and uncertainties include but are
not limited to the following: (i) uncertainties with respect to the final
purchase price to be paid by Zenith Insurance under the Asset Purchase
Agreement; (ii) the value of the transferred assets and the transferred
liabilities; (iii) the ability of Zenith Insurance to recover any amounts from
RISCORP for breaches of representations, warranties and covenants under the
Asset Purchase Agreement; (iv) Zenith Insurance's ability to recover from
RISCORP certain assets not transferred to Zenith Insurance at closing; (v) the
ability of Zenith Insurance to obtain satisfactory ceded reinsurance protection
relating to development of losses and loss adjustment expense reserves assumed
from RISCORP; and (vi) other risks detailed herein and from time to time in the
Registrant's other reports and filings with the Securities and Exchange
Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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ZENITH NATIONAL INSURANCE CORP.
Dated: July 9, 1998 By: /s/ FREDRICKA TAUBITZ
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Fredricka Taubitz
EXECUTIVE VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
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