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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):
March 26, 1999
ZENITH NATIONAL INSURANCE CORP.
(Exact name of registrant as specified in its charter)
Delaware 1-9627 95-2702776
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
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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(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 dated as of June
17, 1997 (as amended) among 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 assumed certain liabilities of
RISCORP related to its workers' compensation insurance business (the
"RISCORP Acquisition").
Under the Asset Purchase Agreement, the purchase price was to be the
difference between the GAAP book value of the assets acquired and the GAAP
book value of the liabilities assumed as of the closing date, with a payment
at closing of $35 million. Accordingly, at the closing, Zenith Insurance paid
$35 million in cash to RISCORP, $10 million of which was paid into an escrow
account established as a source of funds to satisfy RISCORP's indemnification
obligations to Zenith Insurance under the Asset Purchase Agreement. The
final purchase price was to be determined in accordance with a process
established in the Asset Purchase Agreement.
Since the parties were unable to agree on the GAAP book value of the assets
acquired and the GAAP book value of the liabilities assumed, the Asset
Purchase Agreement called for the items in dispute to be submitted for
resolution to a nationally recognized independent accounting firm acting as
"Neutral Auditor and Neutral Actuary."
On March 19, 1999, the Neutral Auditor and Neutral Actuary issued its report
(the "Neutral Report"), indicating a final purchase price of $92.3 million.
A copy of Registrant's Press Release dated March 22, 1999 reporting receipt
of the Neutral Report is attached hereto as an exhibit and incorporated
herein by reference.
Pursuant to the Asset Purchase Agreement, on March 26, 1999, Zenith Insurance
paid to RISCORP, Inc. (on behalf of RISCORP, Inc. and its subsidiaries that
are parties to the Asset Purchase Agreement) and to the escrow account the
balance due on the final purchase price as indicated in the Neutral Report,
as adjusted by Zenith Insurance for the net value of certain assets that were
not transferred to Zenith Insurance by RISCORP. The adjustments, which
result in a reduction of $6.8 million, were made by Zenith Insurance on the
grounds that such an adjustment is permitted under the Asset Purchase
Agreement and certain other agreements previously reached with RISCORP.
There can be no assurance that RISCORP will not challenge the Neutral Report
or the adjustments made by Zenith Insurance.
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The payment made on March 26, 1999 consisted of a direct payment to RISCORP,
Inc. of $50.8 million, including $3.1 million in interest at 6.25% per annum,
and a payment of $2.8 million into the escrow account, which now has a
balance of $12.8 million.
Other matters are still in dispute between the parties and some are the
subject of litigation. On January 11, 1999, Zenith Insurance served RISCORP
with a complaint filed in the United States District Court for the Southern
District of New York, alleging various claims arising from the RISCORP
Acquisition, including damages for breaches of representations, warranties,
and covenants in the Asset Purchase Agreement. On January 22, 1999, RISCORP
served Zenith Insurance with a complaint in an action that RISCORP had filed
in the United States District Court for the Middle District of Florida.
RISCORP alleges damages suffered by it based on the failure of Zenith
Insurance to comply with certain indemnification provisions of the Asset
Purchase Agreement, as well as damages relating to the improper acquisition
by Zenith Insurance of certain assets. Both cases are pending and the
Registrant is unable to predict the outcome of them.
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 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)
the ability of Zenith Insurance to recover any amounts from RISCORP for
breaches of representations, warranties, and covenants alleged to have
occurred under the Asset Purchase Agreement; (ii) the ability of RISCORP to
recover any amounts from Zenith Insurance for the alleged failure to comply
with certain indemnification provisions of the Asset Purchase Agreement; and
(iii) other risks detailed herein and from time to time in Registrant's other
reports and filings with the Securities and Exchange Commission.
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ITEM 7. EXHIBITS.
EXHIBIT NO. DESCRIPTION
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99.1 Press Release of Zenith National Insurance Corp.,
dated March 22, 1999
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 hereunto duly authorized.
ZENITH NATIONAL INSURANCE CORP.
March 30, 1999
By: /s/ Fredricka Taubitz
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Fredricka Taubitz
Executive Vice President
& Chief Financial Officer
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[LOGO]
Zenith National Insurance Corp.
21255 Califa Street
Woodland Hills, CA 91367-5021
Reply to: P.O. Box 9055
Van Nuys, CA 91409-9055
PRESS RELEASE Telephone 818/713-1000
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BUSINESS & FINANCIAL EDITORS FREDRICKA TAUBITZ
Executive Vice President
FOR IMMEDIATE RELEASE & Chief Financial Officer
WOODLAND HILLS, CA. March 22, 1999 .. Zenith National Insurance Corp.
(NYSE:ZNT) announced today that it has received a report from a neutral third
party relating to the determination of the proper GAAP book value of the
assets and liabilities that Zenith's wholly-owned subsidiary, Zenith
Insurance Company, acquired from RISCORP, Inc. on April 1, 1998. The report
was issued pursuant to a procedure established under the asset purchase
agreement for the determination of the purchase price for the RISCORP
transaction. The report indicates that the total purchase price would be
$92.3 million, of which $35 million has already been paid by Zenith.
Zenith is now studying the report and conferring with its advisors to
determine what changes to its financial statements may be necessary or
appropriate.
The above release 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 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. Zenith National Insurance Corp. 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.
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