Exhibit 99.1
___________________
Financial Statements
Required by Form 11-K in accordance with
Rule 15d-21 under the Securities
Exchange Act of 1934
___________________
For the Fiscal Year Ended December 31, 1993
of
The Zenith Investment Partnership
401(k) Plan
ZENITH NATIONAL INSURANCE CORP.
-------------------------------
The principal executive offices of Zenith National
Insurance Corp. are located at 21255 Califa Street,
Woodland Hills, California 91367-5021.
ITEM 1. NOT APPLICABLE
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ITEM 2. NOT APPLICABLE
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ITEM 3. NOT APPLICABLE
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ITEM 4. FINANCIAL STATEMENTS AND SCHEDULES
- - ------- PREPARED IN ACCORDANCE WITH THE FINANCIAL
REPORTING REQUIREMENTS OF ERISA
Page
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Report of Independent Accountants................................2
Statement of Net Assets Available for
Benefits As Of December 31, 1993
and 1992.........................................................3
Statement of Changes in Net Assets
Available for Benefits For Years
Ended December 31, 1993 and 1992.................................4
Notes to Financial Statements....................................5
Supplemental Schedules:
Item 27a - Schedule of Assets Held For
Investment As Of December 31, 1993..............................12
Item 27d - Schedule of Reportable
Transactions For The Year
Ended December 31, 1993.........................................13
1
REPORT OF INDEPENDENT ACCOUNTANTS
______________
To the Administrative Committee of
The Zenith Investment Partnership
401(k) Plan
We have audited the accompanying statement of net assets available for benefits
of The Zenith Investment Partnership 401(k) Plan (the "Plan") as of December 31,
1993 and 1992 and the related statement of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The Zenith
Investment Partnership 401(k) Plan as of December 31, 1993 and 1992 and the
changes in net assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of the Plan,
listed in the index on page 1, are presented for purposes of additional analysis
and are not a required part of the basic financial statements, but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion are fairly stated in all material respects, in relation to the
basic financial statements taken as a whole.
COOPERS & LYBRAND
Los Angeles, California
June 10, 1994
2
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1993 AND 1992
____________________
1993 1992
---- ----
Assets:
Investments:
Zenith National Insurance Corp.
Common stock, at market (296,037
shares, $5,461,841 cost for 1993
and 251,048 shares, $4,103,033 cost
for 1992) $ 6,623,915 $4,958,198
Short-term investment fund 5,508,150 4,180,168
Invested cash 346,581 47,162
----------- ----------
Total investments 12,478,646 9,185,528
Contributions receivable - participant 73,809
Contributions receivable - employer 20,934
Accrued investment income 14,755 11,628
----------- ----------
Total assets 12,493,401 9,291,899
----------- ----------
Liabilities:
Accrued withdrawals 140,795
Amount due broker 47,168
----------
Total liabilities 187,963
----------- ----------
Net assets available for benefits $12,493,401 $9,103,936
=========== ==========
The accompanying notes are an integral part of this statement.
3
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
__________________
1993 1992
---- ----
Additions:
Contributions:
Employer $ 654,639 $ 568,726
Participants 2,494,364 2,138,291
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Total contributions 3,149,003 2,707,017
----------- ----------
Rollovers from other plans 25,685 53,679
----------- ----------
Investment income:
Dividends 425,380 342,294
Net appreciation
in fair value of investment in
Zenith National Insurance Corp.
common stock 478,673 716,795
----------- ----------
Total investment income 904,053 1,059,089
----------- ----------
Total additions 4,078,741 3,819,785
----------- ----------
Deductions:
Withdrawals by participants 689,276 764,926
----------- ----------
Net additions 3,389,465 3,054,859
Net assets available for benefits:
Beginning of year 9,103,936 6,049,077
----------- ----------
End of year $12,493,401 $9,103,936
=========== ==========
The accompanying notes are an integral part of this statement.
4
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
____________
1. THE PLAN:
The following is a general description of The Zenith Investment Partnership
401(k) Plan (the "Plan").
GENERAL
The Plan is a qualified stock bonus plan offered to all eligible employees
of Zenith National Insurance Corp. ("ZNIC") and its affiliates ("the
Company"), who are age twenty-one or older as of the enrollment dates. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and Section 401(a) and Section 401(k) of the
Internal Revenue Code of 1986, as amended ("IRC"). At December 31, 1993
and December 31, 1992 there were, respectively, 1,004 and 863 participants
in the Plan. Of those participants, 825 and 726 in 1993 and 628 and 471 in
1992 elected to invest, either wholly or partially, in the Short-Term
Investment Fund and Company Stock Fund, respectively.
CONTRIBUTIONS
Participants may elect to contribute between 1% to 12% of their basic
compensation up to a maximum of $8,994 for 1993 and $8,728 for 1992 (Salary
Reduction Contributions). The maximum is adjusted each year for increases
in the cost of living as provided in applicable regulations. This annual
amount is an aggregate limitation that applies to all of an individual's
Salary Reduction Contributions and similar contributions under other plans.
The Company contributes 33-1/3% of the participant's "matched" contribution
amount (matched contributions are defined as the first 6% of each
participant's monthly contributions). The Company's contribution is
invested exclusively in the common stock of ZNIC ("Company Stock").
5
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
________________
1. THE PLAN, CONTINUED:
The Salary Reduction Contributions, made on behalf of each participant, are
paid to the Trustee on or immediately after the last day of each month, and
are subsequently deposited to the investment funds as directed by the
participant.
PARTICIPANT ACCOUNTS
Each participant's account is credited with: (1) the participant's
contributions, (2) participant rollover contributions from non-Company
plans, (3) the related Company matching contributions, and (4) fund
earnings. These accounts are summarized in the accompanying financial
statements as net assets available for benefits.
VESTING
Each participant has an immediate, fully vested right to receive all Salary
Reduction Contributions, all Company matching contributions made prior to
January 1, 1991, and earnings thereon, upon termination from the Company,
or upon separation caused by death of the participant. All Company
matching contributions made after January 1, 1991 are subject to a five
year graduated vesting schedule with respect to participants who became
employed by the Company on or after April 1, 1988.
However, irrespective of the vesting schedule, a participant is fully
vested upon his death, disability or attainment of Normal Retirement Age.
WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT
Except in limited circumstances, withdrawals may not be made by a
participant while employed by the Company. Hardship withdrawals of a
participant's Salary Reduction Contributions are permitted where a
participant has an immediate and heavy financial need
6
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
__________________
1. THE PLAN, CONTINUED:
(as determined under Section 401(k)(2)(B)(IV) of the IRC) and that need
cannot be satisfied from other resources of the participant. In addition,
any participant who is 59-1/2 years old may only withdraw his Salary
Reduction Contributions.
INVESTMENTS
Each participant directs that Salary Reduction Contributions for his
benefit and any earnings thereon be invested in one or both of the
following funds:
a. A Short-Term Investment Fund which invests in a no-load
diversified open-end management investment company whose objective is
maximum current income consistent with liquidity and the maintenance
of a portfolio of high quality, short-term "money-market" instruments;
or
b. A Company Stock Fund which invests solely in Company
stock.
The Company's contributions and any earnings thereon will be invested in
the Company Stock Fund and are not subject to participant direction until
such participant reaches age fifty-five (55).
PAYMENT OF BENEFITS
Upon termination of employment, if a distribution is made, a participant
(1) receives cash with respect to his interest in the Short-Term Investment
Fund and (2) may elect to receive cash or shares of Company Stock plus cash
in lieu of any fractional shares, with respect to his interest in the
Company Stock Fund.
EXPENSES
Expenses in connection with the purchase or sale of stock or other
securities are charged to the fund for which such purchase or sale is made.
The Trust Agreement stipulates that expenses incurred by the Trustee in the
performance
7
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
__________________
1. THE PLAN, CONTINUED:
of its duties shall be paid from the Trust Fund unless paid by the Company
at its sole discretion. During 1993 and 1992, the Company elected to pay
the Trustee's expenses in excess of the interest earned during the year on
temporary invested cash. The total Trustee expenses for 1993 and 1992 were
$24,197 and $18,523, of which $959 and $1,136 respectively, were offset by
income on unallocated cash temporarily invested. The balances of $23,238
and $17,387 were paid by the Company. In addition, certain administrative
expenses such as accounting, legal and recordkeeping fees, were paid by the
Company during 1993 and 1992.
TERMINATION
While the Company has not expressed an intent to terminate the Plan, it may
do so at any time. Upon such termination, each participant shall be fully
(100%) vested in his account balances, determined as of the date of such
termination.
ADMINISTRATION
The Plan is administered by an Administrative Committee appointed by the
Board of Directors of ZNIC.
The Committee has responsibility for administration of the Plan, including
supervision of the collection of contributions, delivery of such
contributions to the trustee, and maintenance of necessary records.
The Trustee is City National Bank, Beverly Hills, California. The
Trustee's responsibilities include receipt of Plan contributions,
investment and maintenance of trust assets in the available funds, and
distributions under the Plan of such amounts as the Committee shall direct
from time to time.
RECLASSIFICATIONS
Certain amounts in the 1992 financial statements have been reclassified to
conform to the 1993 presentation.
8
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
___________________
1. THE PLAN, CONTINUED:
PLAN AMENDMENTS
A plan amendment was adopted by the Board of Directors of ZNIC on March 17,
1994 with an effective date of March 31, 1994. The amendment provides that
after March 31, 1994 no future additions to any Participant Matched
Contributions or Unmatched Contributions Account are to be invested in
Company Stock, except that dividends on shares of Company Stock comprising
March 31, 1994 balances shall continue to be added to such accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INVESTMENTS
Investments are stated at fair value.
The value ("net asset value") of a share of the no-load diversified open-
end management investment company ("Management Company") in which the
Short-Term Investment Fund invests is determined by adding the value of all
securities and other assets in the Management Company's portfolio,
deducting the Management Company's liabilities and dividing by the number
of shares outstanding. The Management Company intends to use its best
efforts to maintain a constant net asset value of $1 per share.
The value of the Company Stock is determined using the December 31, 1993
and 1992 closing price on the New York Stock Exchange.
Purchases and sales of securities are reflected on a trade date basis (the
date when the order to buy or sell is executed). Gains or losses on sales
of securities are computed on an average cost basis.
Dividend income is accrued on the ex-dividend date.
The net appreciation (depreciation) in the fair value of the Plan's
investments disclosed in the Statement of Changes in Net Assets Available
For Benefits consists of realized gains or losses and unrealized
appreciation (depreciation) on investments.
9
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
_________________
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CONTRIBUTIONS
Company and participant contributions are recorded in the period that a
participant's payroll deduction is made.
3. TAX STATUS:
The Plan was designed to qualify under Sections 401(a) and 401(k) of the
IRC such that the Trust is exempt from federal income taxes under Section
501(a) of the IRC. The Plan has received a favorable determination letter
from the Internal Revenue Service as to the above.
4. NET ASSET ALLOCATION:
As of December 31, 1993 net assets available for plan benefits of the
Company Stock Fund and Short-Term Investment Fund were $6,840,593 and
$5,652,808, respectively, and as of December 31, 1992 were $5,007,424 and
$4,237,307, respectively.
5. FEDERAL INCOME TAXES APPLICABLE TO PARTICIPANTS:
The income tax rules affecting Plan participation are complex, subject to
interpretation by the Secretary of the Treasury and subject to change. A
general summary of the Federal tax consequences of participation in the
Plan
10
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
___________________
5. FEDERAL INCOME TAXES, CONTINUED:
follows. An expanded discussion of tax consequences is available in the
prospectus dated June 26, 1988, as amended March 18, 1994 related to the
Plan.
In general, 401(k) Company and Salary Reduction Contributions are not
subject to tax when made. In addition, earnings and gains on a
participant's account are not subject to tax when credited.
Generally, distributions from the Plan are subject to tax in the year
received from the Plan. However, under certain circumstances, a
distribution, or part thereof, may not be taxed if rolled over to an
Individual Retirement Account or other qualified plan. If taxable, a
distribution may be eligible for special tax treatment under the IRC.
In addition to regular taxes, most distributions received before a
participant is age 59-1/2 will be subject to a 10% additional tax. Under
limited circumstances, distributions in excess of IRC determined limits
will be subject to a 15% excise tax.
11
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
ITEM 27A SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1993
___________
Current
Description Cost Value
- - ----------- ---- -------
Zenith National Insurance Corp.
Common Stock, 296,037 shares,
$296,037 par value $5,461,841 $6,623,915
Merrill Lynch Institutional Fund
5,508,150 shares,
$5,508,150 par value 5,508,150 5,508,150
City National Bank Money Market
Investment Account
346,581 shares,
$346,581 par value 346,581 346,581
12
THE ZENITH INVESTMENT PARTNERSHIP 401(k) PLAN
ITEM 27D SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
___________________________________________
Current value of Asset Net Gain
Description Purchase Price Selling Price Cost on Transaction Date or (Loss)
- - ----------- -------------- ------------- ---- ---------------------- ---------
Purchases:
Zenith National
Insurance Corp.
common stock $1,841,532 $1,841,532
Merrill Lynch
Institutional Fund 1,649,647 1,649,647
City National Bank
Money Market
Investment Account 3,533,933 3,533,933
Sales:
Zenith National
Insurance Corp.
common stock $654,488 $482,724 654,488 $171,764
Merrill Lynch
Institutional Fund 321,665 321,665 321,665 -0-
City National Bank
Money Market
Investment Account 3,234,514 3,234,514 3,234,514 -0-
13