THEZENITH LOGO



SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-KFOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2004


OR

o
TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934For the transition period from....... to .......Commission file number 1-9627


ZENITH NATIONAL INSURANCE CORP.

(Exact Name of Registrant as Specified in Its Charter)

|DELAWARE(State or Other Jurisdiction of Incorporation
or Organization) | 95-2702776(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------- | ----------------------------------------------

|21255 Califa Street, Woodland Hills, California(Address of Principal Executive Offices) | 91367-5021(Zip Code)
|--------------------------------------------------------------------------------------- | --------------------

Registrant's telephone number, including area code: (818) 713-1000

Securities registered pursuant to Section 12(b) of the Act:

|Title of Each Class           | Name of Each Exchange on
Which Registered
|----------------------------- | -----------------------------------------
|Common Stock, $1.00 Par Value | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.          YesX No

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    ý

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)          Yes
X No

The
aggregate market value of the voting stock of the registrant held by non-affiliates of Zenith National Insurance Corp. on June 30, 2004 was $538,757,000 (based on
the closing sale price of such stock on such date).

At
February 14, 2005, there were 19,617,000 shares of Zenith National Insurance Corp. common stock outstanding, net of 7,577,000 shares of treasury stock.

DOCUMENTS
INCORPORATED BY REFERENCE

(1)  Portions
of the Annual Report to Stockholders for fiscal year ended December 31, 2004  Part I and Part II.

(2)  Portions
of the Proxy Statement in connection with the 2005 Annual Meeting of Stockholders  Part III.

Total
number of pages 60

Exhibit
Index located on pages 32-40



---



Table of ContentsZenith National Insurance Corp. and Subsidiaries
Index to Financial Statements, Schedules and Exhibits

|Item     |  | Description                                                                                                  |  | Page
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|Part I   |  |                                                                                                              |  |     
|Item 1   |  | Business                                                                                                     |  | 1   
|         |  | General                                                                                                      |  | 1   
|         |  | Glossary of Selected Insurance Terms                                                                         |  | 1   
|         |  | Description of the Business                                                                                  |  | 3   
|         |  | Loss and Loss Expense Reserves and Claims and Loss Developments                                              |  | 10  
|         |  | Reinsurance Ceded                                                                                            |  | 14  
|         |  | Marketing and Staff                                                                                          |  | 18  
|         |  | Competition                                                                                                  |  | 18  
|         |  | Regulation                                                                                                   |  | 18  
|         |  | Ratio of Earnings to Fixed Charges                                                                           |  | 20  
|         |  | Risks Relating to Our Business                                                                               |  | 20  
|Item 2   |  | Properties                                                                                                   |  | 26  
|Item 3   |  | Legal Proceedings                                                                                            |  | 26  
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                                          |  | 26  
|Part II  |  |                                                                                                              |  |     
|Item 5   |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 27  
|Item 6   |  | Selected Financial Data                                                                                      |  | 28  
|Item 7   |  | Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations           |  | 28  
|Item 7A  |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 28  
|Item 8   |  | Financial Statements and Supplementary Data                                                                  |  | 28  
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 28  
|Item 9A  |  | Controls and Procedures                                                                                      |  | 28  
|Item 9B  |  | Other Information                                                                                            |  | 29  
|Part III |  |                                                                                                              |  |     
|Item 10  |  | Directors and Executive Officers of the Registrant                                                           |  | 30  
|Item 11  |  | Executive Compensation                                                                                       |  | 30  
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 30  
|Item 13  |  | Certain Relationships and Related Transactions                                                               |  | 30  
|Item 14  |  | Principal Accountant Fees and Services                                                                       |  | 30  
|Part IV  |  |                                                                                                              |  |     
|Item 15  |  | Exhibits, Financial Statement Schedules                                                                      |  | 31  
|         |  | Signatures                                                                                                   |  | 41  
|         |  | Table of Contents to Financial Statements, Schedules and Exhibits                                            |  | 42  

---





Item 1. Business.  General

Zenith National Insurance Corp. ("Zenith National"), a Delaware corporation incorporated in 1971, is a holding company engaged through its wholly-owned insurance
subsidiaries, Zenith Insurance Company ("Zenith Insurance"), ZNAT Insurance Company ("ZNAT Insurance") and Zenith Star Insurance Company ("Zenith Star"), (collectively, "Zenith"), in the workers'
compensation insurance business, nationally, and assumed reinsurance business. Unless otherwise indicated, all references to "Zenith," "we," "us," "our," the "Company" or similar terms refer to Zenith
National together with its subsidiaries.

Zenith's
insurance subsidiaries have been assigned a financial strength rating of A- (Excellent) by A.M. Best Company ("A.M. Best"); Baa1 (Adequate) by Moody's Investors
Service ("Moody's"); BBB+ (Good) by Standard & Poor's ("S&P"); and A- (Strong) by Fitch Ratings ("Fitch"). These A.M. Best, Moody's, S&P and Fitch ratings are based upon factors of
concern to policyholders and insurance agents and are not directed toward the protection of investors.

At
December 31, 2004, Zenith had approximately 1,600 full-time employees. The principal executive offices of Zenith are located at 21255 Califa Street, Woodland
Hills, California 91367-5021, telephone (818) 713-1000.

Zenith's
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those
reports, Proxy Statement for its Annual Meeting of Stockholders and Annual Report to Stockholders (which is filed as an exhibit to this report) are made available free of charge on its website at
www.thezenith.com as soon as reasonably practicable after such reports have been electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). Also available at our website
are the following corporate governance materials: Code of Business Conduct and Ethics; Code of Ethics for Senior Financial Officers (which applies to Zenith's Chief Executive Officer, Chief Financial
Officer and Controller); Corporate Governance Guidelines; and Charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. In addition, amendments to, or
waivers of, the Code of Ethics for Senior Financial Officers will be posted to our website or contained in a Form 8-K filed within four business days after any such amendment or
waiver. Any of the foregoing material may also be obtained, free of charge by written request to: Corporate Secretary, Zenith National Insurance Corp., 21255 Califa Street, Woodland Hills, CA
91367-5021.

Glossary of Selected Insurance Terms

The following terms when used herein have the following meanings:

|Accident year losses |  | Loss data grouped by the year in which the accident occurred, regardless of when the accident was reported.
|-------------------- |  | -----------------------------------------------------------------------------------------------------------
|Assume               |  | To receive from a ceding company all or a portion of a risk in consideration of receipt of a premium.      
|Cede                 |  | To transfer to a reinsurer all or a portion of a risk in consideration of payment of a premium.            
|                     |  |                                                                                                            

1

---



|Combined ratio                         |  | The combined ratio, expressed as a percentage, is a key measurement of profitability traditionally used in the property-casualty insurance industry. The combined ratio is the sum of the loss and loss adjustment expense ratio and the underwriting and
other operating expense ratio. The loss and loss adjustment expense ratio is the percentage of the net incurred loss and loss adjustment expenses to net premiums earned. The underwriting and other operating expense ratio is the percentage of
underwriting and other operating expenses to the net premiums earned.
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Development                            |  | The amount by which estimated losses, measured subsequently by reference to payments and additional estimates, differ from those originally reported for a period. Development is favorable when losses ultimately settle for less than levels at which
they were reserved or subsequent estimates indicate a basis for reserve decreases on open claims. Development is unfavorable when losses ultimately settle for more than levels at which they were reserved or subsequent estimates indicate a basis for
reserve increases on open claims.                               
|Excess of loss reinsurance             |  | A form of reinsurance in which the reinsurer pays all or a specified percentage of a loss caused by a particular occurrence or event in excess of a fixed amount and up to a stipulated limit.                                                                                                                                                                                                                                                                                                                                                                                   
|Incurred but not reported claims       |  | Claims relating to insured events that have occurred but have not yet been reported to the insurer or reinsurer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|In-force premiums                      |  | Premiums billed or to be billed on all policies not yet expired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Loss adjustment expenses               |  | The expenses of investigating, administering and settling claims, including legal expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Loss ratio                             |  | Net incurred losses expressed as a percentage of net premiums earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Loss and loss adjustment expense ratio |  | The sum of net incurred losses and loss adjustment expenses expressed as a percentage of net premiums earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Net premiums earned                    |  | The portion of net premiums written applicable to the expired period of policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Policyholder dividend                  |  | A policy upon which a portion of the premium may be repaid to the policyholder after expiration depending upon the loss experience.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Policyholders' surplus                 |  | The amount remaining after all liabilities are subtracted from all admitted assets, as determined in accordance with statutory accounting practices. This amount is regarded as financial protection to policyholders in the event an insurance company
suffers unexpected or catastrophic losses.                                                                                                                                                                                                                                                                               
|Reinstatement premium                  |  | An additional premium paid after a claim on a catastrophe reinsurance contract to renew the contract for the unexpired term.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

2

---



|Reinsurance                    |  | A transaction in which an original insurer, or ceding company, remits a portion of the premium to a reinsurer, or assuming company, as payment for the reinsurer's assumption of a portion of the risk.                                                                                                                                        
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Reserves or loss reserves      |  | The balance sheet liability representing estimates of amounts needed to pay reported and unreported claims and related loss adjustment expenses.                                                                                                                                                                                               
|Retention                      |  | The amount of loss(es) from a single occurrence or event which is paid by the company prior to the attachment of excess of loss reinsurance.                                                                                                                                                                                                   
|Retrocession                   |  | A reinsurance of reinsurance assumed.                                                                                                                                                                                                                                                                                                          
|Retrospectively-rated policy   |  | A policy containing a provision for determining the insurance premium for a specified policy period on the basis of the loss experience for the same period.                                                                                                                                                                                   
|Statutory accounting practices |  | Accounting practices prescribed or permitted by the states' departments of insurance. In general, statutory accounting practices address policyholder protection and solvency and are more conservative in presentation of earnings, surplus and assets
than accounting principles generally accepted in the United States of America ("GAAP").
|Treaty                         |  | A contract of reinsurance.                                                                                                                                                                                                                                                                                                                     
|Underwriting                   |  | The process whereby an insurer reviews applications submitted for insurance coverage and determines whether to accept all or part, and at what premium, of the coverage being requested.                                                                                                                                                       
|Underwriting expenses          |  | The aggregate of policy acquisition costs and the portion of administrative, general and other expenses attributable to the underwriting process as they are accrued and expensed.                                                                                                                                                             

Description of the Business

Zenith is in the business of managing insurance and investment risk. Our main business activity is the workers' compensation insurance business and we also
operate a small assumed reinsurance business. In addition, Zenith maintains a portfolio of investments, principally in fixed maturity securities, funded by the operating cash flows from our insurance
businesses and capital. Investment income from the portfolio is impacted by current and historical interest rates and the amount of operating cash flows generated annually from (or used by) the
workers' compensation and reinsurance segments. Results of the workers' compensation and reinsurance segments may fluctuate due to, among other things, the possibility of material and unpredictable
catastrophe losses in our reinsurance segment. We measure our performance by our ability to increase stockholders' equity over the long-term.

Our
business is classified into the following segments: workers' compensation; reinsurance; investments; and parent. Our real estate segment was discontinued in 2002. Results and
descriptions of Zenith's business segments are contained in the Notes to Consolidated Financial Statements  Note 16  "Segment Information" in Zenith's
2004 Annual Report to Stockholders, and is hereby incorporated by reference.

3

---





In the workers' compensation segment, we provide insurance coverage for the statutorily prescribed benefits that employers are required to provide to their
employees who may be injured in the course of employment. Zenith's workers' compensation policies are issued to employers who also pay the premiums. The policies provide payments for covered, injured
employees of the policyholder for, among other things, temporary or permanent disability benefits, death benefits and medical and
hospital expenses. The benefits payable and the duration of such benefits are set by statute, and vary by state and with the nature and severity of the injury or disease and the wages, occupation and
age of the employee.

Generally,
premiums for workers' compensation insurance policies are a function of: (1) the applicable premium rate, which varies with the nature of the employees' duties and the
business of the employer; (2) the amount of the insured employer's payroll; and (3) if applicable, a factor reflecting the insured employer's historical loss experience (the "experience
modification factor"). Payrolls are affected significantly by changes in employment and wage levels. A deposit premium is paid at the beginning of the policy period, periodic installments are paid
during the policy period and the final amount of the premium is generally determined as of the end of the policy period after the policyholder's payroll records are audited. Except in Florida, where
premium rates for workers' compensation insurance are set by the Florida Department of Insurance ("Florida DOI"), Zenith's premium rates for workers' compensation are determined by our actuaries for
each state in which we do business. In California, the state with the largest concentration of our workers' compensation business, insurance companies are required by law to set adequate workers'
compensation premium rates for their own use. Although the California Insurance Commissioner does not set workers' compensation premium rates, the California Insurance Commissioner adopts and
publishes advisory pure premium rates (pure premium rates are rates that would cover expected loss costs but do not contain an element to cover operating expenses or profit). We are not required to
use these California advisory rates. Our rates are continually reviewed for adequacy using actuarial analysis of current and anticipated trends in costs. In recent years, significant cost increases
have necessitated rate increases particularly in California. However, on July 1, 2004, we reduced our California premium rates by 10% for new and renewal policies effective July 1, 2004,
following the workers' compensation reform legislation enacted in October 2003 and April 2004. A discussion of the reform legislation follows on page 5.

In
certain circumstances, a policyholder may be eligible for a return of a portion of the premium based on the loss experience during the policy term, by way of a dividend, calculated
and paid after the policy has expired. Alternatively, the policyholder's premium may be adjusted after expiration using a retrospective-rating formula which may also involve additional premium due
from the policyholder if loss experience is worse than expected. Although we offer these types of loss-sensitive policies and have written a small number of them, we prefer to offer our
customers a policy with a guaranteed cost based on premium rates, payroll and experience modification factors.

Zenith's
long-term strategy in the national workers' compensation industry is to write policies that deliver quality services based on adequate premium rates. During periods
of intense competition or other adverse industry conditions, our premium revenue is reduced as employers buy elsewhere because we adhere to a long-standing operating principle that we will not
compromise the adequacy of our rates in order to achieve revenue or market share objectives. Our value proposition is that our services, over the long-run, provide employers the
opportunity to reduce their experience modification factor and their long-term workers' compensation costs. Our loss prevention services focus on workplace safety, accident and illness
prevention and safety awareness training. Claims management services include return-to-work programs, case management by nurses for serious injuries and management of medical
provider services and billings. Investigation and legal services help to detect and prevent fraud and to pursue favorable resolution of litigated claims. Our premium auditors verify appropriate
payroll

4

---



classifications
to assure equitable premium billing. We do not outsource any of our key workers' compensation services, including legal services which are provided by our in-house attorneys and
supporting staff.

During
2004, Zenith wrote workers' compensation insurance in 45 states. Prior to 1992, Zenith's workers' compensation segment was concentrated principally in California. We expanded into
Texas in 1992 with other states following shortly thereafter. Florida operations commenced with the acquisition of the Associated General Commerce Self-Insurers' Trust Fund ("AGC") on
December 31, 1996. On April 1, 1998, Zenith Insurance acquired substantially all of the assets and certain liabilities of RISCORP, Inc. and certain of its subsidiaries
(collectively, "RISCORP") related to RISCORP's workers' compensation business (the "RISCORP Acquisition"). The RISCORP Acquisition added workers' compensation business in Florida and other states in
the Southeast, principally in North Carolina and Alabama. In recent years, California has offered us the best opportunity to profitably expand our business and has become the state in which the
majority of our net premiums are derived. Florida is our second largest state of operations. Net premiums earned for each of the years ended December 31, 2004, 2003 and 2002 for California,
Florida and other states, are set forth in the table below:

(Dollars in thousands)

2004

%

2003

%

2002

%California

$
621,284

68.9
%
$
458,312

64.3
%
$
277,120

55.0
%Florida


152,007

16.9


126,333

17.7


97,925

19.4Other


128,756

14.2


128,151

18.0


128,814

25.6Net Premiums Earned

$
902,047

100.0
%
$
712,796

100.0
%
$
503,859

100.0
%


Zenith's national workers' compensation operations are conducted through offices maintained throughout the country. There are six offices in
California, two in Florida and offices in each of Texas, Illinois, Pennsylvania, North Carolina and Alabama.

The
combined ratio, expressed as a percentage, is a key measurement of profitability traditionally used in the property-casualty insurance industry. The combined ratio is the sum of the
loss and loss adjustment expense ratio and the underwriting and other operating expense ratio. The loss and loss adjustment expense ratio is the percentage of the net incurred loss and loss adjustment
expenses to net premiums earned. The underwriting and other operating expense ratio is the percentage of underwriting and other operating expenses to the net premiums earned. The key operating goal
for our insurance segments is to achieve a combined ratio of 100% or lower. Earned premiums and the combined ratios of our workers' compensation and reinsurance segments and results of our other
business segments for the each of the three years ended December 31, 2004, are set forth in the "Results of Operations" section of the Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations and in Note 16  "Segment Information" in Zenith's 2004 Annual Report to Stockholders and are hereby incorporated by reference.

Workers' Compensation Reform Legislation.The concentration of Zenith's business in California and Florida makes the results
of our operations dependent on trends that are characteristic of these states
as compared to national trends, for example, state legislation, local competition and workers' compensation inflation trends in such states.

In
California, workers' compensation reform legislation was enacted in October 2003 and April 2004 with the principal objectives of lowering the trend of increasing costs
and improving fairness in the system. The principal changes in the legislation of October 2003 are as follows: 1) a reduction in the reimbursable amount for certain physician fees,
outpatient surgeries, pharmaceutical products and certain durable medical equipment; 2) a limitation on the number of chiropractor and physical therapy office visits; 3) the introduction
of medical utilization guidelines; 4) a requirement for second opinions on certain spinal surgeries; 5) a repeal of the presumption of correctness afforded to the treating

5

---



physician,
except where the employee has pre-designated a treating physician; and 6) a presumption of correctness is to be afforded to the evidence-based medical utilization
guidelines developed by the American College of Occupational and Environmental Medicine.

The
principal changes in the legislation of 2004 are as follows: 1) employers and insurers are authorized, beginning in 2005, to establish networks of medical providers within
which injured workers are required to be treated (an independent medical review would be allowed if the claimant disputes the treatment recommended in the network only after obtaining the opinions of
three network physicians); 2) within one working day of filing a claim form, a claimant must be afforded necessary treatment for up to $10,000 in medical fees (however, employers and insurers
still have up to 90 days to investigate the compensability of a claim); 3) a methodology for apportioning disabilities between work-related and non-work related
causes was created and employers will only be liable for the portion of permanent disability that is directly work-related; 4) Temporary Disability ("TD") benefits are not to exceed
104 weeks within 2 years of the first TD payment, but cases with certain specified injuries will be allowed up to 240 weeks of TD benefits within 5 years of the date of injury;
5) Permanent Disability ("PD") ratings are based on a new, objective disability rating schedule effective January 1, 2005 (and for some injuries prior to January 1, 2005) as well
as upon the injured workers' diminished future earning capacity, rather than their ability to compete in the open labor market (PD benefits were revised to make available higher benefits to more
severely injured workers and lower benefits to less severely injured workers); 6) incentives were created to encourage employers to offer return-to-work programs; and
7) new medical-legal processes for resolving disputed medical issues were created.

In
Florida, legislation was enacted effective October 1, 2003, which provides changes to the workers' compensation system. Such changes are designed to expedite the dispute
resolution process, provide greater compliance and enforcement authority to combat fraud, revise certain indemnity benefits and increase medical reimbursement fees for physicians and surgical
procedures. One of the intended outcomes of the legislation is a reduction in the overall costs associated with delivering workers' compensation benefits in the state of Florida. The premium rates
that we and other insurance companies use for workers' compensation insurance in Florida are set by the Florida DOI. The Florida DOI decreased premium rates by an average of 14%, effective
October 1, 2003, which offsets a previous average increase in premium rates as of April 1, 2003. Effective January 1, 2005, the Florida DOI decreased premium rates by an average
of 5.1%.

In
both California and Florida, the major risk factor associated with these recent legislative changes is the impact the changes will have on the operation of the workers' compensation
system, including the trend of loss costs. In California, where we file and use our own premium rates, we believe that a measured and gradualistic response is appropriate to estimating the future
impact of the California workers' compensation legislation because there is considerable uncertainty as to how some of the provisions will impact the behavior of the various participants in the
California workers' compensation system and because some of the provisions did not become effective until January 1, 2005. Although we expect that, when fully implemented, the legislation
should result in a lower trend of cost increases than we had experienced prior to the legislation, we cannot currently estimate the amount or the timing of the effects of such legislation. We reduced
our California rates by 10% for new and renewal policies effective July 1, 2004. As provided for by legislation enacted in California in 2002, changes in indemnity benefits will increase total
costs by 2.8% effective January 1, 2005 (and will further increase total costs by 2.7% on January 1, 2006). We filed premium rates in California for use on or after January 1,
2005 that reflect an overall decrease of 1.5% from the rates in effect since July 1, 2004. After we have obtained further data about our loss cost trends, we will decide what changes, if any,
are appropriate for our California workers' compensation rates.

Our
insurance company subsidiaries are subject to taxes on their gross premium revenue in lieu of most state income taxes. In California, the premium tax rate is 2.35%. A proposed ballot
initiative has been received by the California Attorney General's Office in California which, among other things,

6

---



would
increase the California premium tax rate to 7.0%. We cannot predict if the proposed initiative will receive the required number of signatures for inclusion on a statewide ballot or, if included
on such a ballot, whether the initiative would be approved by the California electorate.



Reinsurance is a transaction between insurance companies in which an original insurer, or ceding company, remits a portion of its premiums to a reinsurer, or
assuming company, as payment for the reinsurer's assumption of a portion of the risk. Our reinsurance segment participates in assumed reinsurance transactions in which, typically, the reinsurance
coverage being purchased by the ceding company is shared among a number of assuming companies. We currently focus primarily on assumed reinsurance of worldwide property losses from catastrophes and
large property risks. In the insurance industry, catastrophes are events such as tornadoes, hurricanes and earthquakes that cause widespread damage. Insurance companies purchase catastrophe
reinsurance to protect themselves from the aggregation of losses caused by a large number of claims from policies written in the impacted geographical area. Contract language in catastrophe
reinsurance contracts defines which perils will or will not be covered by the reinsurer and certain events such as acts of terrorism or flooding may not be covered, depending upon the terms of the
contract.

We
participate in reinsurance contracts that are either proportional in nature, in which the assuming company shares pro rata in the premiums and losses of the ceding company (quota
share reinsurance), or arrangements under which the assuming company pays losses in excess of a certain limit in return for a premium, usually determined as a percentage of the ceding company's
primary insurance premiums (known as excess of loss reinsurance). Depending upon market conditions and other factors, the volume of premiums written fluctuates from year to year. By diversifying the
geographical spread of risk and limiting the number of contracts that we write, our assumed reinsurance business is written so that the exposure to reinsurance losses from any one catastrophic event
in a worst-case scenario, after the benefit of the applicable premium and reinstatement premium income and income taxes, is not expected to be more than 5% of Zenith's consolidated stockholders'
equity (or about $25 million at December 31, 2004).

The
income or loss and the combined ratio of the reinsurance segment fluctuate significantly depending upon the incidence or absence of large catastrophe losses. Consequently, the
results of our reinsurance business should be evaluated over the long-term. Since its inception in 1985, the combined ratio of our reinsurance segment through December 31, 2004 was
101.9% on $752.2 million of net premiums earned. Loss reserves, net of reinsurance, at December 31, 2004 in our reinsurance segment were $137.9 million, or 11.4% of consolidated
net loss reserves. In 2004, we recorded a loss in our reinsurance segment due to catastrophe losses of $21.1 million before tax ($13.7 million after tax) principally from Hurricanes
Charley, Frances, Ivan and Jeanne offset, in part, by a reduction of previously established loss reserves for the World Trade Center loss in 2001. In 2002, estimated catastrophe losses were
$0.4 million attributable to European floods otherwise, there were no major catastrophe losses that impacted the reinsurance treaties we wrote in the years ended December 31, 2003 and
2002, and results of the reinsurance segment were a pre-tax profit of $9.6 million and $7.6 million, respectively.

Estimating
catastrophe losses in the reinsurance business is highly dependent upon the nature and timing of the event and Zenith's ability to obtain timely and accurate information with
which to estimate its liability to pay losses. Estimates of the impact of catastrophes on the reinsurance segment are based on the information that is currently available and such estimates could
change based on new information that becomes available or based upon any reinterpretation of existing information.

In
addition to property reinsurance we have, historically, written reinsurance for liability insurance, such as general business liability coverage, directors' and officers' liability
and excess or umbrella

7

---



coverage.
Although we wrote more of this type of business at the beginning of our involvement in the reinsurance business in 1985, liability reinsurance constituted about 22% of our earned reinsurance
premiums in the ten years ended December 31, 2004.



Our investments department invests the funds made available by our capital and the cash flows from our workers' compensation and reinsurance segments. The
objective of our investments segment is to provide income and realized gains on investments, primarily from investments in fixed maturity securities, consistent with policy guidelines and taking into
consideration state regulatory restrictions. Because the exact timing of the payment of claims cannot be predicted with certainty, the insurance subsidiaries maintain portfolios of invested assets
with varying maturities and a substantial amount of short-term investments to provide adequate cash for the payment of claims. The allocation of the portfolio among various types of
securities is adjusted from time to time based on market conditions, credit conditions, tax policy, fluctuations in interest rates and other factors. At December 31, 2004, Zenith's consolidated
investment portfolio emphasized high-quality, taxable bonds and short-term investments, supplemented by smaller portfolios of municipal bonds, redeemable preferred stocks and
other preferred and common stocks. The portfolio of taxable bonds primarily includes U.S. Government securities, mortgage-backed securities issued by the Government National Mortgage Association and
corporate bonds diversified to produce a reasonable balance of risk and investment income. Of the fixed maturity portfolio, including short-term investments, 95% of the investments were
rated investment-grade at December 31, 2004 compared to 94% at December 31, 2003.

Income
from the investments segment and investment yields for each of the three years ended December 31, 2004 and a discussion of the composition of the investment portfolio at
December 31, 2004 and 2003 are set forth under the "Investments" section of the Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations of Zenith's
2004 Annual Report to Stockholders and are hereby incorporated by reference. This information shows the trend of an increasing investment portfolio and increasing investment income as a result of
increased operating cash flows moderated by the impact of declining interest rates.

At
December 31, 2004, 92% of the investments in fixed maturity securities and short-term investments were classified as available-for-sale.
Stockholders' equity will fluctuate with changes in the fair values of available-for-sale securities. Stockholders' equity decreased by $4.2 million after deferred taxes
from December 31, 2003 to December 31, 2004 as a result of changes in the fair values of such investments.

From
time to time, we also make investments in limited partnerships and real estate joint ventures. The limited partnerships make long-term strategic investments in
corporations, many of which are not publicly traded, with a view to exiting the investment position, sometimes after many years. The long-term value of some of these underlying investments
are subject to uncertainties, including, in some cases, the impact of foreign economic and political developments. In 2004, we recognized a gain of $11.6 million from one of these partnerships.
Our real estate joint ventures include projects on Las Vegas Boulevard in Las Vegas, Nevada and in downtown Sarasota, Florida. The Las Vegas project is substantially completed and in 2004 we received
a return of all of our capital investment and $4.0 million for our share of the profits from the venture. Although we cannot predict gains with any certainty, there are sales contracts for all
of the 95 condominiums which comprise the residential component of our Sarasota venture and we expect to receive our share of the profits during 2005 as the sales are closed. The commercial component
of the Sarasota venture is completed and the principal retail tenant opened for business in December 2004.

8

---





The parent segment loss reflects the holding company activities of Zenith National, which owns, directly or indirectly, all of the capital stock of its insurance
and non-insurance subsidiaries (except for the equity investment described below). Results of the parent segment reflect the operating expenses that it incurs in the course of its holding
company activities, such as directors fees; stock exchange listing and other licensing fees; insurance costs; and legal, auditing and other administrative fees. Interest expense incurred on
outstanding debt pursuant to financing and refinancing activities is also a part of the parent segment loss.



We also participate in the worldwide reinsurance business through an investment in a company that operates in the property and casualty insurance business in the
United Kingdom. We own 22.1 million shares, or approximately 20.9% of the outstanding shares, of Advent Capital (Holdings) PLC ("Advent Capital"). Advent Capital and its subsidiaries provide
corporate capital to support the underwriting of certain Lloyd's of London syndicates and manage those syndicates. The syndicates operate in the global insurance and reinsurance business with an
emphasis on property catastrophe reinsurance.

We
account for our investment in Advent Capital using the equity method of accounting, on a one quarter lag to allow sufficient time for Advent Capital to prepare its financial
statements. The carrying
value of the investment in the common stock of Advent Capital is equal to Zenith's equity in the underlying net assets of Advent Capital. The carrying value at December 31, 2004 and 2003 was
$28.1 million and $25.2 million, respectively, including goodwill of $11 million.

Our
share of Advent Capital's net income included in our statement of operations was as follows:

|                                                        
|--------------------------------------------------------
|
|
|
|Zenith's share of Advent Capital's net income, after tax
|                                                        

Our share of Advent Capital's net income in 2004 includes $4.7 million for catastrophe losses from the Florida hurricanes and in 2003 about
$0.9 million of adverse development from the 2001 World Trade Center losses.

Our
share of Advent Capital's net income could be subject to fluctuations in the future caused by catastrophe losses. Our exposure to any losses associated with our investment in Advent
Capital is limited to the carrying value of our investment.

Fairfax
Financial Holdings Limited ("Fairfax"), a Toronto based financial services holdings company, also owns approximately 47% of the outstanding shares of Advent Capital as of
December 31, 2004.



On October 8, 2002, Zenith closed the sale of its home-building business and related real estate assets to Meritage Corporation ("Meritage").
The business had been operated by Zenith National's indirect wholly-owned subsidiary, Zenith of Nevada, Inc. (formerly, Perma-Bilt, a Nevada Corporation ("Perma-Bilt")).
In the transaction, Meritage, through its wholly-owned subsidiary, MTH-Homes Nevada, Inc. ("MTH Nevada"), acquired substantially all of Perma-Bilt's assets, subject to the related
liabilities, pursuant to a Master Transaction Agreement, dated as of October 7, 2002, and related asset and real property acquisition agreements (collectively, the "Agreement"). Zenith received
gross proceeds of $65.0 million in connection with the sale, including $28.4 million in repayment of

9

---



intercompany
loans made by Zenith National to Perma-Bilt, and recorded a gain on the sale in 2002 of $6.3 million after tax.

In
addition to the consideration received in October 2002, the Agreement entitles Zenith to receive 10% of MTH Nevada's pre-tax net income, subject to certain
adjustments, for each of the twelve-month periods ending September 30, 2003, September 30, 2004 and September 30, 2005. We recorded additional gains on this sale of
$2.0 million before tax ($1.3 million after tax) and $1.8 million before tax ($1.2 million after tax) in 2004 and 2003, respectively. These gains represent our share of MTH
Nevada's profits for the twelve months ended September 30, 2004 and 2003, respectively, under the earn-out provisions of the Agreement. We expect to receive a final payment in 2005,
but we are unable to estimate the amount.

For
the year ended December 31, 2002, the results of operations and cash flows for Zenith's real estate business are presented as discontinued operations. The following table
summarizes the revenues and income from our discontinued real estate segment in the year ended December 31, 2002:

|                                                       
|-------------------------------------------------------
|
|
|Real estate sales                                      
|                                                       
|Income from discontinued real estate segment before tax
|Income tax expense                                     
|                                                       
|Income from discontinued real estate segment after tax 
|                                                       

Loss and Loss Expense Reserves and Claims and Loss Developments

Accounting for the workers' compensation and reinsurance segments requires us to estimate the liability for the expected ultimate cost of unpaid losses and loss
adjustment expenses ("loss reserves") as of the balance sheet date. The adequacy of loss reserves is inherently uncertain and represents a significant risk to the business which we attempt to mitigate
by continually reviewing loss cost trends, attempting to set our premium rates to adequately cover anticipated costs and by professionally managing our claims servicing organization. We endeavor to
minimize the estimation risk by employing actuarial techniques on a quarterly basis. Judgment is required in actuarial estimation to ascertain the relevance of historical payment and claim settlement
patterns under current facts and circumstances. No assurance can be given whether the ultimate liability for unpaid losses will be more or less than our current estimates.

The
amount by which estimated losses, measured subsequently by reference to payments and additional estimates, differ from those originally reported for a period is known as
"development." Development is unfavorable when losses ultimately settle for more than the levels at which they were reserved or subsequent estimates indicate a basis for reserve increases on open
claims. Development is favorable when losses ultimately settle for less than the amount reserved or subsequent estimates indicate a basis for reducing loss reserves on open claims. Favorable or
unfavorable developments of loss reserves are reflected in our results of operations in the period the changes are made.

Additional
information regarding loss reserve estimates and loss reserve development is set forth under "Loss Reserves" in the Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations in Zenith's 2004 Annual Report and is hereby incorporated by reference.

10

---







The table that follows shows development of loss and loss adjustment expense liabilities as originally estimated in accordance with GAAP at December 31 of
each year presented.

|                                                                                |                  
|------------------------------------------------------------------------------- | -----------------
|
|
|Liability for unpaid losses and loss adjustment expenses, net                   |                  
|                                                                                |                  
|Paid, net (cumulative) as of:                                                   |                  
|                                                                                | One year later   
|                                                                                | Two years later  
|                                                                                | Three years later
|                                                                                | Four years later 
|                                                                                | Five years later 
|                                                                                | Six years later  
|                                                                                | Seven years later
|                                                                                | Eight years later
|                                                                                | Nine years later 
|                                                                                | Ten years later  
|                                                                                |                  
|Liability, net re-estimated as of:                                              |                  
|                                                                                | One year later   
|                                                                                | Two years later  
|                                                                                | Three years later
|                                                                                | Four years later 
|                                                                                | Five years later 
|                                                                                | Six years later  
|                                                                                | Seven years later
|                                                                                | Eight years later
|                                                                                | Nine years later 
|                                                                                | Ten years later  
|                                                                                |                  
|(Deficient) favorable development, net                                          |                  
|                                                                                |                  
|Net liability  December 31,                                                    |                  
|Receivable from reinsurers and state trust funds for unpaid losses              |                  
|                                                                                |                  
|Gross liability  December 31,                                                  |                  
|Re-estimated liability, net                                                     |                  
|Re-estimated receivable from reinsurers and state trust funds for unpaid losses |                  
|                                                                                |                  
|Re-estimated liability, gross                                                   |                  
|                                                                                |                  
|Deficient development, gross                                                    |                  
|                                                                                |                  

The accounting policies used to estimate the liabilities in the preceding table are described in Note 2 to the Consolidated Financial
Statements in Zenith's 2004 Annual Report to Stockholders which note is hereby incorporated by reference.

The
analysis in the preceding table presents the development of our balance sheet liabilities for unpaid losses and loss adjustment expenses. The first line in the table shows the
liability for unpaid losses and loss adjustment expenses, net of reinsurance, as estimated at the end of each calendar year. The first section below that line shows the cumulative actual payments of
loss and loss adjustment expenses, net of reinsurance, that relate to each year-end liability as they were paid at the end of subsequent annual periods. The second section shows revised
estimates of the original unpaid amounts, net of reinsurance, that are based on the subsequent payments and re-estimates of the remaining unpaid liabilities. The next line shows the
favorable or deficient developments of the original estimates, net of reinsurance. Loss reserve development in this table is cumulativei.e., the
estimated favorable or deficient development for a particular year represents the cumulative amount by which all previous liabilities are currently estimated to have been over- or under-estimated. For
example, at December 31, 2004, we currently estimate that all of our previous estimates were collectively underestimated by about $13.4 million, or 1.3% of the December 31, 2003
balance sheet estimate for net loss reserves.

11

---



Adverse
development of our balance sheet liabilities for 1999-2003 is attributable to increases in our workers' compensation loss reserves in 2003 and 2002, and additional
estimates for 1998 and 1999 catastrophe losses in our reinsurance business. In 2004 we re-allocated our workers' compensation loss reserves by accident year and increased our liabilities for old
accident year losses. A complete description of loss reserve estimates and loss reserve development is set forth under "Loss Reserves" and "Inflation" in the Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations in Zenith's 2004 Annual Report and is hereby incorporated by reference.

Starting
with the liability at the end of 1998, our loss reserve estimates include amounts for the loss reserves we assumed from RISCORP in the RISCORP Acquisition. The purchase price of
RISCORP was determined in a three-step process, which culminated in the determination by a neutral auditor and neutral actuary of the GAAP values of the assets and liabilities acquired
from RISCORP. In 1999, we determined that it was necessary to increase the estimate of the loss reserves assumed from RISCORP by approximately $46.0 million, net of reinsurance. This adjustment
to the RISCORP purchase price is reflected in the preceding table as adverse development of the 1998 loss reserve liability.

In
1999, we sold CalFarm Insurance Company ("CalFarm"), a wholly-owned subsidiary of Zenith Insurance, which we had owned since 1985. CalFarm wrote insurance coverage for automobile,
homeowners, group health, farmowners and other businesses, principally in California. We retained no liabilities for any of CalFarm's unpaid losses or loss adjustment expenses after the sale. In the
preceding table, CalFarm's loss reserves are included in the first line through December 31, 1998. Subsequent payments for CalFarm's loss reserve estimates include payments through
March 31, 1999, the date of the sale. Subsequent re-estimates of CalFarm's loss reserves are also included in the preceding table. After the date of sale, the
re-estimated liability for CalFarm's loss reserves reflects the last re-estimate of CalFarm's liabilities that we made prior to the sale.

Since
conditions and trends that have affected loss and loss adjustment expense development in the past may not occur in the future in exactly the same manner, if at all, future results
may not be reliably predicted by extrapolation of the data presented.

Reference
is made to the table setting forth the reconciliation of changes in the liabilities for loss and loss adjustment expenses included in Notes to Consolidated Financial
Statements  Note 8, "Unpaid Losses and Loss Adjustment Expenses" in Zenith's 2004 Annual Report to Stockholders, which is hereby incorporated by reference.



Advent Capital operates in the insurance and reinsurance business by providing capital to syndicates of Lloyd's of London and by managing those syndicates. Advent
Capital records its proportionate share of the insurance assets and liabilities of the syndicates to which it provides capital, based on the relative share of capital provided by it to the syndicates.
Zenith is accounting for its investment in Advent Capital on the equity method of accounting on a one quarter lag to allow sufficient time for Advent Capital to prepare its financial information. The
table that follows represents

12

---



a
reconciliation of changes in the liability for unpaid losses and loss adjustment expenses in Advent Capital's financial statements:

|                                                               |                      
|-------------------------------------------------------------- | ---------------------
|
|
|
|Beginning of period, net of receivable from reinsurers         |                      
|Adjustment (4)                                                 |                      
|                                                               |                      
|Revised beginning of period, net of receivable from reinsurers |                      
|                                                               |                      
|Incurred claims:                                               |                      
|                                                               | Current year         
|                                                               | Prior years          
|                                                               |                      
|                                                               | Total incurred claims
|Payments:                                                      |                      
|                                                               | Current year         
|                                                               | Prior years          
|                                                               |                      
|Total payments                                                 |                      
|                                                               |                      
|End of period, net of receivable from reinsurers               |                      
|Receivable from reinsurers for unpaid losses                   |                      
|                                                               |                      
|End of period                                                  |                      
|                                                               |                      

The
preceding reconciliation of changes in the liability for unpaid losses and loss adjustment expenses are presented as of and for the following periods:



13

---





The
table that follows shows development of loss and loss adjustment expense liabilities as originally estimated at December 31 of each year presented for Advent Capital. Advent
Capital became a corporate underwriting member of Lloyd's in 1996.

|                                                                      |                   |  
|--------------------------------------------------------------------- | ----------------- | -
|
|
|
|
|Liability for unpaid losses and loss adjustment expenses, net         |                   | $
|Adjustment (1)                                                        |                   |  
|                                                                      |                   |  
|Revised liability for unpaid losses and loss adjustment expenses, net |                   |  
|                                                                      |                   |  
|Paid, net cumulative as of (2):                                       |                   |  
|                                                                      | One year later    |  
|                                                                      | Two years later   |  
|                                                                      | Three years later |  
|                                                                      | Four years later  |  
|                                                                      | Five years later  |  
|                                                                      | Six years later   |  
|                                                                      | Seven years later |  
|                                                                      | Eight years later |  
|                                                                      | Nine years later  |  
|                                                                      |                   |  
|Liability, net re-estimated as of (2):                                |                   |  
|                                                                      | One year later    |  
|                                                                      | Two years later   |  
|                                                                      | Three years later |  
|                                                                      | Four years later  |  
|                                                                      | Five years later  |  
|                                                                      | Six years later   |  
|                                                                      | Seven years later |  
|                                                                      | Eight years later |  
|                                                                      | Nine years later  |  
|                                                                      |                   |  
|(Deficient) favorable development, net                                |                   |  
|                                                                      |                   |  
|Net liability                                                         |                   |  
|Receivable from reinsurers for unpaid losses                          |                   |  
|                                                                      |                   |  
|Gross liability                                                       |                   |  
|Re-estimated liability, net of reinsurance                            |                   |  
|Re-estimated receivable from reinsurers for unpaid losses             |                   |  
|                                                                      |                   |  
|Re-estimated liability, gross                                         |                   |  
|                                                                      |                   |  
|(Deficient) favorable development, gross                              |                   |  
|                                                                      |                   |  



Results of operations for Advent Capital may be adversely impacted in periods that sustain large catastrophe losses. Advent Capital's 2004 results
of operations included losses related to Hurricanes Charley, Ivan, Frances and Jeanne of $49.7 million before tax. Adverse development of the reserves established at September 30, 2002
and December 31, 2001 was principally attributable to increased estimates for losses sustained by Advent Capital in connection with the 2001 World Trade Center losses.

Reinsurance Ceded



Excess of loss reinsurance is a form of reinsurance in which the reinsurer pays all or a specified percentage of a loss caused by a particular occurrence or event
in excess of a fixed amount and up to a stipulated limit. In accordance with general insurance industry practices, we purchase excess of loss reinsurance to protect Zenith against the impact of large,
irregularly-occurring losses in the workers'

14

---



compensation
segment. Such reinsurance reduces the magnitude of sudden and unpredictable changes in net income and the capitalization of Zenith Insurance. Zenith maintains reinsurance protection for
large catastrophe losses up to $150.0 million in excess of a retention of $1.0 million.

An
excess of loss reinsurance treaty with Employers Reinsurance Corporation ("Employers Re") provides $9.0 million of reinsurance protection, per occurrence, for workers'
compensation losses in excess of a $1.0 million retention. In 2005, reinsurance provides protection for losses in excess of $10.0 million up to $150.0 million. In 2004, we
retained one third of any losses between $75.0 million and $150.0 million (of which there were none). The principal companies providing the coverage are Arch Reinsurance Company,
Folksamerica Reinsurance Company, Odyssey America Reinsurance Corporation, Swiss Reinsurance Company, Transatlantic Reinsurance Company, XL America, Axis Specialty, ACE Tempest Reinsurance Company,
Endurance Specialty, Hanover Reinsurance Company, Aspen Reinsurance Company, Catlin Insurance Company, Allied World Assurance Company Limited and various Lloyd's syndicates.



Under our workers' compensation policies, we are required to provide workers' compensation benefits for losses arising from acts of terrorism. The impact of any
terrorist act is unpredictable, and the ultimate impact on us will depend upon the nature, extent, location and timing of such an act. Any such impact on us could be material.

For
2005 Zenith has purchased reinsurance for acts of terrorism. The limit for domestic acts of terrorism is $150.0 million, in excess of a $1.0 million retention; and, the
limit for foreign acts of terrorism is $75.0 million, in excess of a $1.0 million retention. Both of these coverages exclude nuclear, biological and chemical attacks for losses in excess
of $10.0 million.

In
November 2002, the Terrorism Risk Insurance Act of 2002 (the "Act") became effective and is effective for the period from November 26, 2002 until December 31,
2005. It is unclear at this time whether or not the Act, or a modified version, will be extended beyond December 31, 2005. The Act may also provide us with reinsurance protection under certain
circumstances and subject to certain limitations. The Secretary of the U.S. Treasury Department must certify an act for it to constitute an act of terrorism. The definition of terrorism excludes
domestic acts of terrorism or acts of terrorism committed in the course of a war declared by the U.S. Congress. Losses arising from an act of terrorism must exceed $5.0 million to qualify for
reimbursement. If an event is certified, the U.S. Federal Government will reimburse losses not to exceed $100.0 billion in any year. Each insurance company is responsible for a deductible based
on a percentage of direct earned premiums in the previous calendar year. For losses in excess of the deductible, the U.S. Federal Government will reimburse 90% of the insurer's loss, up to the
insurer's proportionate share of the $100.0 billion.

The
Act contemplates that affiliated insurers will be treated collectively as one entity by the U.S. Treasury Department for purposes of calculating direct earned premiums and,
therefore, an insurer's deductible. As of December 31, 2003, companies controlled by Fairfax owned approximately 41% of our outstanding common stock (not including shares issuable upon
conversion of Convertible Notes held by affiliates of Fairfax). Fairfax has disclaimed any control of Zenith and has granted to a trustee a proxy to vote all of the shares of our common stock held by
Fairfax and its subsidiaries in proportion to the voting of all other Zenith National stockholders. In January 2004, we received a final determination from the U.S. Treasury Department in which
it determined that the direct earned premiums for U.S. exposures of the insurers controlled by Fairfax (the "Fairfax direct earned premiums") are required to be combined with our direct earned
premiums for purposes of calculating our deductible under the Act. Including the Fairfax direct earned premiums with ours, our deductible for 2005 is approximately $351.1 million. As a result
of the sale of 3.1 million shares of Zenith National common stock by subsidiaries of Fairfax in 2004, Fairfax now owns less than 25% of our outstanding common stock at December 31, 2004
(not including shares issuable upon conversion of the Convertible

15

---



Notes
held by affiliates of Fairfax). We have sought a determination from the U.S. Treasury Department as to whether the Fairfax direct earned premiums will continue to be required to be combined with
our direct earned premiums for purposes of calculating our deductible under the Act. If the U.S. Treasury Department determines that the Fairfax direct earned premiums are no longer required to be
combined with our direct earned premiums, then our deductible in 2005 would be approximately $155.2 million.

Notwithstanding
the protection provided by the reinsurance we have purchased and any protection provided by the Act, the risk of severe losses to Zenith from acts of terrorism has not
been eliminated
because events may not be covered by, or may exceed the capacity of, our reinsurance protection. Accordingly, any acts of terrorism could materially adversely affect our business and financial
condition.

In
our workers' compensation business, we monitor the geographical concentrations of insured employees to help mitigate the risk of loss from terrorist acts. Also, small businesses
constitute a large proportion of our policies, and we avoid risks in high profile locations. In our reinsurance business, any terrorism exposure we have assumed is subject to our underwriting
guidelines not to write business that could expose us to losses from a single event of greater than about $25 million after deducting applicable premium income and after tax.



Quota share reinsurance is a form of reinsurance in which the assuming company accepts a pro rata share of the ceding company's losses and an equal share of the
applicable premiums. In addition, the assuming company pays the ceding company a fee, known as a ceding commission, which is usually a percentage of the premiums ceded. Quota share reinsurance allows
the ceding company to increase the amount of business it could otherwise write by sharing the risks with the assuming company. The effect of the quota share reinsurance on the ceding company is
similar to increasing its capital, the principal constraint on the amount of business an insurance company can prudently write. Zenith and Odyssey America Reinsurance Corporation ("Odyssey America"),
a subsidiary of Fairfax, entered into a 10% quota share ceded reinsurance agreement with respect to all new and renewal workers' compensation business written by Zenith in the three years commencing
January 1, 2002. Ceded earned premiums under the quota share contract were $98.7 million, $78.5 million and $36.8 million, respectively, in 2004, 2003 and 2002.

Effective
December 31, 2004, Zenith terminated the quota share contract with Odyssey America. In connection with the termination, Zenith Insurance also elected to reassume the
ceded unearned premiums in-force as of December 31, 2004. Other than the effect on net premiums earned (which will be higher because 10% of the premium will no longer be ceded), the
termination of the quota share agreement is not expected to have a material impact on our consolidated financial condition or results of operations.



Other than our excess of loss reinsurance protection and the quota share agreement discussed above, we are involved in collecting reinsurance recoverable under
reinsurance contracts that were entered into by companies that we acquired and whose reinsurance arrangements we terminated. Our reinsurance recoverable includes $33.3 million relating to
reinsurance arrangements assumed by Zenith
in the RISCORP Acquisition. The principal reinsurers from which such reinsurance is recoverable are American Re-Insurance Company, Continental Casualty Co., Swiss Reinsurance Company and
Trenwick America Reinsurance Company. Also, in connection with the RISCORP Acquisition, Zenith Insurance entered into an aggregate excess of loss reinsurance agreement with Inter-Ocean Reinsurance
Company, Ltd., which provides ceded reinsurance for unpaid losses and allocated loss adjustment expenses assumed by Zenith from RISCORP at April 1, 1998 up to $50.0 million in
excess of $182.0 million. Reinsurance recoverable from Inter-Ocean Reinsurance Company is fully secured by assets in a trust account.

16

---







Reinsurance makes the assuming reinsurer liable to the ceding company to the extent of the reinsurance. It does not, however, discharge the ceding company from
its primary liability to its policyholders in the event the reinsurer is unable to meet its obligations under such reinsurance treaty. We monitor the financial condition of our reinsurers and do not
believe that Zenith is currently exposed to any material credit risk through its ceded reinsurance arrangements other than in connection with Reliance Insurance Company ("Reliance"). Historically, no
material amounts due from reinsurers have been written-off as uncollectible because most of our reinsurance is recoverable from large, well-capitalized reinsurance companies.
However, on October 3, 2001, the Commonwealth Court of Pennsylvania approved an Order of Liquidation for Reliance in response to a petition from the Pennsylvania Department of Insurance. At
December 31, 2004 and 2003, Reliance owed Zenith Insurance $6.0 million of reinsurance recoverable on paid and unpaid losses in connection with reinsurance arrangements assumed by Zenith
Insurance in its 1996 acquisition of the AGC. We have recorded a provision for impairment of reinsurance recoverable from Reliance which was $3.0 million at December 31, 2004 and 2003.
The eventual outcome of this matter will be determined by the ultimate amount of Reliance's liabilities and whether or not Reliance has sufficient assets or can obtain recoveries and investment income
in an amount sufficient to pay its liabilities.

Amounts
recoverable (including amounts for paid and unpaid losses, prepaid reinsurance premiums and reinsurance commissions) at December 31, 2004 were as follows:

(Dollars in thousands)
Name of Reinsurer

Amount
Recoverable

A.M. Best
Rating (1)Odyssey America Reinsurance Corporation (2)

$
84,048

AGeneral Reinsurance Corporation


83,822

A++Employers Reinsurance Corporation


35,463

AContinental Casualty Company


23,420

AInter-Ocean Reinsurance Company (3)


12,512

AAmerican Re-Insurance Company


11,391

A+Reliance Insurance Company (4)


6,010

Not ratedTrenwick America Reinsurance Corporation (5)


3,230

Not ratedAllstate Insurance Company


1,701

A+Various Syndicates of Lloyd's of London


1,250

ASwiss Reinsurance Company


1,221

A+National Union Fire Insurance Co Of Pittsburgh, PA


1,147

A++Continental Reinsurance Corporation


1,075

AAll Others (70 Reinsurers, none individually in excess of $1.0 million)


5,477Total

$
271,767


17

---





Zenith's insurance subsidiaries are parties to an intercompany pooling agreement. Under such agreement, the results of underwriting operations are ceded (the
risks are transferred) to Zenith
Insurance and the aggregate results are then reapportioned, or retro-ceded (the risks are transferred back), to the companies party to the agreement. At December 31, 2004, the proportions of
the pooling agreement were as follows: Zenith Insurance  97.5%; ZNAT Insurance  2.0%; and Zenith Star  0.5%. Transactions pursuant to the
pooling agreement are eliminated on consolidation and have no impact on Zenith's consolidated financial statements.

Marketing and Staff

The business in the workers' compensation segment is produced by approximately 1,400 independent licensed insurance agents and brokers throughout California,
Florida, Texas, North Carolina and other states in which Zenith conducts its business. Zenith's assumed reinsurance premiums are generated nationally by brokers and reinsurance intermediaries.

Applications
for insurance and reinsurance submitted by all agents and brokers are evaluated by professional underwriters based upon numerous factors, including underwriting criteria and
standards, geographic areas of underwriting concentration, actuarial judgments of premium rate adequacy, economic considerations and review of known data on the particular risk. We retain all
authority over underwriting, claims processing, safety engineering and auditing and do not delegate any such authority to our agents or brokers.

Competition

Competition in the insurance business is based upon price and quality of service. The insurance industry is highly competitive and there is significant
competition in the national workers' compensation industry which, at times, is intense. Zenith competes not only with other stock companies, but with mutual companies and other underwriting
organizations such as the State Compensation Insurance Fund in California. Competition also exists with self-insurers and captive insurers. Many companies in competition with us have been
in business for a much longer time, have a larger volume of business, are more widely known, and/or possess substantially greater financial resources.

Regulation

The insurance business is subject to state-by-state regulation and legislation that focuses on solvency, pricing, market conduct, claims
practices, underwriting, accounting, investment criteria and other areas. Such regulation and legislation is subject to continual change and compliance is an inherent risk of the business.



Insurance companies are subject to regulation and supervision by the department of insurance in the state in which they are domiciled and, to a lesser extent,
other states in which they conduct business. Our insurance subsidiaries are primarily subject to regulation and supervision by the California Department of Insurance, except for Zenith Star, which is
primarily subject to regulation and supervision by the Texas Department of Insurance. These state agencies have broad regulatory, supervisory and administrative powers, including, among other things,
the power to: grant and revoke licenses to transact business; license agents; set the standards of solvency to be met and maintained; determine the nature of, and limitations on, investments and
dividends; approve policy forms and premium rates in some states; periodically examine financial statements; determine the form and content of required financial statements; and periodically examine
market conduct.

18

---



Detailed
annual and quarterly financial statements and other reports are required to be filed with the departments of insurance of the states in which we are licensed to transact
business. The financial statements of our insurance subsidiaries are subject to periodic examination by the California and Texas Departments of Insurance. In 2003, the California Department of
Insurance completed an examination of Zenith Insurance and ZNAT Insurance as of December 31, 2001 and the Report of Examination contained no material findings. In 2003, the Texas Department of
Insurance completed an examination of Zenith Star as of December 31, 2001, and the Report of Examination contained no material findings.



The National Association of Insurance Commissioners (the "NAIC") is a group formed by state Insurance Commissioners to discuss issues and formulate policy with
respect to regulation, reporting and accounting of insurance companies. Although the NAIC has no legislative authority and insurance companies are at all times subject to the laws of their respective
domiciliary states and, to a lesser extent, other states in which they conduct business, the NAIC is influential in determining the form in which such laws are enacted. Model Insurance Laws,
Regulations and Guidelines (the "Model Laws") have been promulgated by the NAIC as a minimum standard by which state regulatory systems and regulations are measured. Adoption of state laws which
provide for substantially similar regulations to those described in the Model Laws is a requirement for accreditation by the NAIC. The NAIC provides authoritative guidance to insurance regulators on
current statutory accounting issues by promulgating and updating a codified set of statutory accounting principles in its Accounting Practices and Procedures Manual. The California and Texas
Departments of Insurance have adopted these codified statutory accounting principles.

Under
NAIC Model Laws, insurers are required to maintain minimum levels of capital based on their investments and operations. These "risk-based capital" ("RBC") requirements
provide a standard by which regulators can assess the adequacy of an insurance company's capital and surplus relative to its operations. An insurance company must maintain capital and surplus of at
least 200% of the RBC computed by the NAIC's RBC model (known as the "Authorized Control Level" of RBC). At December 31, 2004, the capital and surplus of Zenith Insurance was 377% of the
Authorized Control Level of RBC.

The
NAIC Insurance Regulatory Information System ("IRIS") key financial ratios, developed to assist insurance departments in overseeing the financial condition of insurance companies,
are reviewed by examiners of the NAIC and state insurance departments to select those companies that merit highest priority in the allocation of the regulators' resources. The 2004 IRIS results for
Zenith Insurance showed three results outside the "normal" range for such ratios, as such range is determined by the NAIC. These results were attributable to historically low yields of fixed maturity
securities in 2004 and adverse development recorded in our workers' compensation loss reserve estimates in prior years.



Zenith's workers' compensation and reinsurance segments are subject to the California and Texas Insurance Holding Company System Regulatory Acts ("Holding Company
Acts") which contain certain reporting requirements, including the requirement that such subsidiaries file information relating to capital structure, ownership, financial condition and general
business operation. The Holding Company Acts also limit dividend payments and material transactions by Zenith's workers' compensation and reinsurance segments. See Item 5 of this Annual Report on
Form 10-K for a discussion of dividend restrictions related to the Holding Company Acts.

19

---





In 2004, New York State Attorney General, Elliot Spitzer, announced that he was investigating various alleged inappropriate solicitation practices between
insurance companies and agents and brokers, including "contingent commissions" under which brokers receive additional payments from insurance companies for placing with them an increased volume of
business. Regulators in various other states have also announced similar investigations into these alleged inappropriate practices. In December
2004, we received a letter of inquiry from the California Department of Insurance ("California DOI") requesting information about Zenith's arrangements and dealings with its agents and brokers. We
have responded fully to the California DOI's inquiry, and we believe that our arrangements and dealings with agents and brokers are in compliance with all applicable statutes and regulations.

Ratio of Earnings to Fixed Charges

Our ratio of earnings to fixed charges for each of the periods indicated is as follows:

|                                   |  | Year Ended December 31,
|---------------------------------- |  | -----------------------
|
|Ratio of earnings to fixed charges |  | 12.34                  

For
purposes of calculating the ratio, earnings consist of income from continuing operations (excluding equity in investee earnings or losses) before provision for income taxes and fixed
charges (except capitalized interest in discontinued operations). Fixed charges include interest expense, interest expense capitalized in discontinued operations and approximately 30% of rental
expense, which is what we believe to be a reasonable approximation of the interest portion of rental expense. In 2002, 2001 and 2000, our earnings were insufficient to cover our fixed charges by
$4.6 million, $46.5 million and $84.6 million, respectively.

Risks Relating to Our Business

Our business is subject to numerous risks and uncertainties, the outcome of which may impact future results of operations and financial condition. Some of these
risks and uncertainties are described below. These and other risks are also described elsewhere as follows: 1) under Item 1  Description of the Business;
2) under Item 7  Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations; and 3) under
Item 8  Notes to Consolidated Financial Statements in Zenith's 2004 Annual Report to Stockholders.

Our loss reserves are based on estimates and may be inadequate to cover our actual losses.

If we fail to accurately assess the risks associated with the businesses that we insure or reinsure, our reserves may be inadequate to cover our actual losses and
we may fail to establish appropriate premium rates. We establish loss reserves in our financial statements that represent an estimate of amounts needed to pay, and administer claims with respect to,
insured and reinsured events that have occurred, including events that have not yet been reported to us. Reserves are estimates and are inherently uncertain; they do not and cannot represent an exact
measure of liability. Accordingly, our reserves may prove to be inadequate to cover our actual losses. Any changes in these estimates are reflected in our results of operations during the period in
which the changes are made, with increases in our reserves resulting in a charge to our earnings.

Our
loss reserve estimates are based on estimates of the ultimate cost of claims and on actuarial estimation techniques. Several factors contribute to the uncertainty in establishing
these estimates. Judgment is required in actuarial estimation to ascertain the relevance of historical payment and claim settlement patterns under current facts and circumstances. Key assumptions in
the estimation process

20

---



for
workers' compensation reserves are the severity trends, including the increasing costs of health care, which affects the medical component of claim costs. If there are unfavorable changes in
severity trends, our reserves may need to be increased, as described above. Our reserve estimates for catastrophe losses in the assumed reinsurance business are dependent upon obtaining information
timely from ceding companies. Estimates of catastrophe losses can be negatively impacted by lags in reporting from ceding companies. In addition, we are subject to the risk that the ceding company may
not have adequately estimated the amount of the reinsured loss.

If we are unable to obtain or collect on ceded reinsurance, our ability to write new policies could be materially adversely affected.

We
buy reinsurance protection in our workers' compensation business to protect us from the impact of large losses over $1.0 million and from the accumulation of losses up to
$150.0 million. The availability, amount and cost of reinsurance depend on market conditions and may vary significantly. Any decrease in the amount of our reinsurance will increase our risk of
loss and could materially adversely affect our business and financial condition.

In
addition, we are subject to credit risk with respect to our reinsurers. Ceded reinsurance does not discharge our direct obligations under the policies we write. We remain liable to
our policyholders, even if we are unable to make recoveries to which we believe we are entitled under our reinsurance contracts. Losses may not be recovered from our reinsurers until claims are paid
and, in the case of long-term workers' compensation cases, the creditworthiness of our reinsurers may change before we can recover amounts to which we are entitled.

Catastrophe losses in our assumed reinsurance business will cause fluctuations in net income.

We participate in the assumed reinsurance of property catastrophe losses. The loss experience of property catastrophe reinsurers has generally been characterized
as low frequency but high severity in nature, and claims from catastrophes could cause substantial volatility in our financial results for any fiscal quarter or year.

Various
events are classified as catastrophes, including hurricanes, windstorms, earthquakes, hail, explosions, severe winter weather and fires as well as man-made events,
such as acts of war, acts of terrorism and political instability. The frequency and severity of these catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function
of both the total amount of insured exposures in the area affected and the severity of the event. The amount of catastrophe reinsurance we write in any one year is limited to produce an expected
estimated maximum loss from a single, worst-case scenario of approximately $25 million, net of all applicable premium and reinstatement premium and income taxes. However,
catastrophe losses could be sizable enough to impact our annual earnings significantly, as they have in recent years.

The risks associated with property and casualty reinsurance underwriting could adversely affect us.

Because we participate in property and casualty reinsurance markets, the success of our underwriting efforts depends, in part, upon the policies, procedures and
expertise of the ceding companies making the original underwriting decisions. We face the risk that these ceding companies may fail to accurately assess the risks that they assume initially which in
turn, may lead us to inaccurately assess the risks we assume. If we fail to establish and receive appropriate premium rates, we could face significant losses on these contracts.

21

---



Acts of terrorism could negatively impact our business and our financial condition.

Under our workers' compensation policies, we are required to provide workers' compensation benefits for losses arising from acts of terrorism. The impact of any
terrorist act is unpredictable, and the ultimate impact on us will depend upon the nature, extent, location and timing of such an act. Any such impact on us could be material.

For
2005 Zenith has purchased reinsurance for acts of terrorism. The limit for domestic acts of terrorism is $150.0 million, in excess of a $1.0 million retention; and, the
limit for foreign acts of terrorism is $75.0 million, in excess of a $1.0 million retention. Both of these coverages exclude nuclear, biological and chemical attacks for losses in excess
of $10.0 million.

In
November 2002, the Terrorism Risk Insurance Act of 2002 (the "Act") became effective and is effective for the period from November 26, 2002 until December 31,
2005. It is unclear at this time whether or not the Act or a modified version will be extended beyond December 31, 2005. The Act may also provide us with reinsurance protection under certain
circumstances and subject to certain limitations. The Secretary of the U.S. Treasury must certify an act for it to constitute an act of terrorism. The definition of terrorism excludes domestic acts of
terrorism or acts of terrorism committed in the course of a war declared by the U.S. Congress. Losses arising from an act of terrorism must exceed $5.0 million to qualify for reimbursement. If
an event is certified, the U.S. Federal Government will reimburse losses not to exceed $100.0 billion in any year. Each insurance company is responsible for a deductible based on a percentage
of direct earned premiums in the previous calendar year. For losses in excess of the deductible, the U.S. Federal Government will reimburse 90% of the insurer's loss, up to the insurer's proportionate
share of the $100.0 billion.

The
Act contemplates that affiliated insurers will be treated collectively as one entity by the U.S. Treasury Department for purposes of calculating direct earned premiums and,
therefore, an insurer's deductible. As of December 31, 2003, companies controlled by Fairfax owned approximately 41% of our outstanding common stock (not including shares issuable upon
conversion of Convertible Notes held by affiliates of Fairfax). Fairfax has disclaimed any control of Zenith and has granted to a trustee a proxy to vote all of the shares of our common stock held by
Fairfax and its subsidiaries in proportion to the voting of all other Zenith National stockholders. In January 2004, we received a final determination from the U.S. Treasury Department in which
it determined that the direct earned premiums for U.S. exposures of the insurers controlled by Fairfax (the "Fairfax direct earned premiums") are required to be combined with our direct earned
premiums for purposes of calculating our deductible under the Act. Including the Fairfax direct earned premiums with ours, our deductible for 2005 is approximately $351.1 million. As a result
of the sale of 3.1 million shares of Zenith National common stock by subsidiaries of Fairfax in 2004, Fairfax now owns less than 25% of our outstanding common stock at December 31, 2004
(not including shares issuable upon conversion of the Convertible Notes held by affiliates of Fairfax). We have sought a determination from the U.S. Treasury Department as to whether the Fairfax
direct earned premiums will continue to be required to be combined with our direct earned premiums for purposes of calculating our deductible under the Act. If the U.S. Treasury Department determines
that the Fairfax direct earned premiums are no longer required to be combined with our direct earned premiums, then our deductible in 2005 would be approximately $155.2 million.

Notwithstanding
the protection provided by the reinsurance we have purchased and any protection provided by the Act, the risk of severe losses to Zenith from acts of terrorism has not
been eliminated because events may not be covered by, or may exceed the capacity of, our reinsurance protection. Accordingly, any acts of terrorism could materially adversely affect our business and
financial condition.

22

---



The insurance business is subject to extensive regulation and legislative changes, which impact the manner in which we operate our business.

Our insurance business is subject to extensive regulation by the applicable state agencies in the jurisdictions in which we operate, perhaps most significantly by
the departments of insurance in California and Texas. These state agencies have broad regulatory powers designed to protect policyholders, not stockholders or other investors. These powers include,
among other things, the ability to:



In
addition, workers' compensation insurance is statutorily provided for in all of the states in which we do business. State laws and regulations provide for the form and content of
policy coverage and the rights and benefits that are available to injured workers, their representatives and medical providers. For example, in California in October 2003 and April 2004,
workers' compensation legislation was enacted with the purpose of lowering the trend of increasing costs and improving the fairness of the workers' compensation system. In Florida, the rates at which
we provide coverage are determined by regulation. Legislation and regulation also impact our ability to investigate fraud and other abuses of the workers' compensation system in the states in which we
do business. Our relationships with medical providers are also impacted by legislation and regulation, including penalties for failure to make timely payments.

Federal
legislation typically does not directly impact our workers' compensation business, but our business can be indirectly affected by changes in health care and occupational safety
and health regulations. In addition, we were impacted by the Terrorism Risk Insurance Act of 2002, as discussed above, and by the Gramm Leach Bliley Act of 2002 related to disclosure of personal
information. Moreover, changes in federal tax laws could also impact our business.

This
extensive regulation of our business may affect the cost or demand for our products and may limit our ability to obtain rate increases or to take other actions that we might desire
to increase our profitability. In addition, we may be unable to maintain all required approvals or comply fully with the wide variety of applicable laws and regulations, which are continually
undergoing revision, or the relevant authority's interpretation of such laws and regulations.

A downgrade in the financial strength rating of our insurance subsidiaries could reduce the amount of business we are able to write.

Rating agencies rate insurance companies based on financial strength as an indication of an ability to pay claims. Our insurance subsidiaries currently have a
financial strength rating of A- (Excellent) from A.M. Best, which we believe has the most influence on our business. The financial strength ratings of A.M. Best and other rating agencies
are subject to periodic review using, among other things, proprietary capital adequacy models, and are subject to revision or withdrawal at any time. Insurance financial strength ratings are directed
toward the concerns of policyholders and insurance agents and are not intended for the protection of investors. Our competitive position relative to other companies is determined in part by our
financial strength rating. Any reduction in our A.M. Best rating below A-, or a downgrading by one of the other rating agencies, could cause a reduction in the number of policies we write
in both our workers' compensation and our assumed reinsurance business and could have a material adverse effect on our results of operations and our financial position.

23

---



Intense competition could adversely affect our ability to sell policies at premium rates we deem adequate.

In most of the states in which we operate, we face significant competition which, at times, is intense. If we are unable to compete effectively, our business and
financial condition could be materially adversely affected. Competition in our businesses is based on many factors, including premiums charged, services provided, financial strength ratings assigned
by independent rating agencies, speed of claims payments, reputation, perceived financial strength and general experience. In the workers' compensation business, we compete with regional and national
insurance companies and state-sponsored insurance funds, as well as potential insureds that have decided to self-insure. Some of our competitors have greater financial, marketing and
management resources than us. Intensive competitive pressure on prices can result from the actions of even a single large competitor, such as the State Compensation Insurance Fund in California.
Except in Florida, where premium rates for workers' compensation insurance are determined by regulation, we use our own premium rates, based on the work of our actuaries, to determine the price for
our workers' compensation policies. Historically, when competition has been intense, the amount of business we are able to write has decreased because we have not reduced our prices to maintain market
share or other revenue targets. As a result, our profitability during those times has decreased.

In
the assumed reinsurance business, our premium volume fluctuates as competitive conditions cause fluctuations in prevailing rates for reinsurance. In the reinsurance business, new
capital can rapidly enter the market when prevailing prices are perceived to be favorable to reinsurers. The new capital is used to form new companies or increase the capacity of existing companies or
other underwriting entities, such as syndicates of Lloyd's of London.

If we are unable to realize our investment objectives, our financial condition may be adversely affected.

Investment income is an important component of our revenues and net income. The ability to achieve our investment objectives is affected by factors that are
beyond our control. For example, United States participation in hostilities with other countries and large-scale acts of terrorism may adversely affect the economy, and our investment income could
decrease. Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions. These and other factors also
affect the equities markets, and, consequently, the value of the equity securities we own. Any significant decline in our investment income as a result of falling interest rates, decreased dividend
payment rates or general market conditions would have an adverse effect on our net income and, as a result, on our stockholders' equity and our policyholders' surplus.

Interest
rates have declined steadily in the past several years. The outlook for our investment income is dependent on the future direction of interest rates and the amount of cash flows
from operations that are available for investment. The fair values of fixed maturity investments that are "available-for-sale" fluctuate with changes in interest rates and
cause fluctuations in our stockholders' equity.

We
invest a small portion of our portfolio in below investment-grade securities. The risk of default by borrowers that issue below investment-grade securities is significantly greater
than other borrowers because these borrowers are often highly leveraged and more sensitive to adverse economic conditions, including a recession. In addition, these securities are generally unsecured
and often subordinated to other debt. The risk that we may not be able to recover our investments in below investment-grade securities is higher than with investment-grade securities.

24

---



Our geographic concentration ties our performance to the business, economic and regulatory conditions in California and Florida.

Our business is concentrated in California (69% of 2004 workers' compensation earned premiums) and in Florida (17% of 2004 workers' compensation earned premiums).
Accordingly, unfavorable business, economic or regulatory conditions in these states could negatively impact our business. For example, regulatory changes in California in the early 1990's created
intense price competition in our workers' compensation business from about 1995 to 1999, during which time our overall profitability experienced significant declines. In addition, California and
Florida are states that are exposed to severe natural perils, such as earthquakes and hurricanes, along with the possibility of terrorist acts. Accordingly, we
could suffer losses as a result of catastrophic events in these states. Because our business is concentrated in this manner, we may be exposed to economic and regulatory risks or risk from natural
perils that are greater than the risks associated with greater geographic diversification.

We rely on independent insurance agents and brokers.

The failure or inability of independent insurance agencies and brokers to market our insurance programs successfully could have a material adverse effect on our
business, financial condition and results of operations. The business in our workers' compensation segment is produced by approximately 1,400 licensed insurance agents and brokers. Our assumed
reinsurance premiums are generated nationally by brokers and reinsurance intermediaries. Agencies and brokers are not obligated to promote our insurance programs and may sell competitors' insurance
programs. As a result, our business depends in part on the marketing efforts of these agencies and brokers and on our ability to offer insurance programs and services that meet the requirements of the
clients and customers of the these agencies and brokers.

Assessments and other surcharges for guaranty funds and second injury funds and other mandatory pooling arrangements may reduce our profitability.

Virtually all states require insurers licensed to do business in their state to bear a portion of the loss suffered by some insureds as the result of impaired or
insolvent insurance companies. These obligations are funded by assessments that are expected to continue in the future as a result of insolvencies. Many states also have laws that established second
injury funds to provide compensation to injured employees for aggravation of a prior condition or injury, which are funded by either assessments based on paid losses or premium surcharge mechanisms.
In addition, as a condition to the ability to conduct business in some states, insurance companies are required to participate in mandatory workers' compensation shared market mechanisms or pooling
arrangements, which provide workers' compensation insurance coverage from private insurers. The effect of these assessments and mandatory shared market mechanisms or changes in them could reduce our
profitability in any given period or limit our ability to grow our business.

The effects of the increasing amount of litigation against insurers on our business are uncertain.

Like other members of the insurance industry, we are the target of an increasing number of class action lawsuits and other types of litigation, some of which
involve claims for substantial and/or indeterminate amounts and the outcomes of which are unpredictable. This litigation is based on a variety of issues including insurance and claim settlement
practices.

Our status as an insurance holding company with no direct operations could adversely affect our ability to meet our debt obligations and pay dividends.

Zenith National is a holding company which transacts substantially all of its business through its subsidiaries. Our primary assets are the stock of our operating
subsidiaries. Our ability to meet our

25

---



obligations
on our outstanding debt, and to pay expenses and dividends, depends, in the long-run, upon the surplus and earnings of our subsidiaries and the ability of our subsidiaries to pay dividends
to us. Payments of dividends by our insurance company subsidiaries are restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds, and could be subject
to contractual restrictions in the future. As a result, at times, we may not be able to receive dividends from these subsidiaries and we may not receive dividends in amounts necessary to meet our debt
obligations or to pay dividends on our capital stock. In addition, the payment of dividends by us is within the discretion of our Board of Directors and will depend on numerous factors, including our
financial condition, our capital requirements and other factors that our Board of Directors considers relevant.

Fairfax has granted a voting proxy with respect to the shares of our common stock owned by companies controlled by it which may impede attempts to
replace or remove our Board or management.

As of December 31, 2004, companies controlled by Fairfax owned 24% of our outstanding common stock (not including shares issuable upon conversion of the
Convertible Notes held by such companies). Fairfax has disclaimed any control of Zenith and has granted to a trustee a proxy to vote all of the shares of common stock held by Fairfax and its
subsidiaries. The proxy provides that the trustee must vote all such shares in proportion to the voting of all other Zenith National stockholders, except in the event of a proxy contest that is not
supported by management and that occurs prior to the earlier of December 31, 2006 and the date on which Stanley R. Zax is no longer our full-time Chairman and President. If such a
hostile proxy contest were to occur, the shares must be voted as recommended by management. This arrangement could prevent or delay a change in our Board of Directors or management, and could cause
the value of our securities to decline.

State insurance laws may discourage takeover attempts that could be beneficial to us and our stockholders.

We are subject to state statutes governing insurance holding companies, which generally require that any person or entity desiring to acquire direct or indirect
control of any of our insurance company subsidiaries obtain prior regulatory approval. Control would be presumed to exist under most state
insurance laws with the acquisition of 10% or more of our outstanding voting securities. Applicable state insurance company laws and regulations could delay or impede a change of control of our
company, which could prevent our stockholders from receiving a control premium.

Item 2. Properties.

Zenith Insurance owns a 130,000 square foot office facility in Woodland Hills, California which is the corporate home office of Zenith National and its
subsidiaries. Zenith Insurance also owns a 120,000 square foot branch office facility in Sarasota, Florida. In the regular conduct of business, Zenith Insurance leases offices in various cities. See
Notes to Consolidated Financial Statements  Note 11  "Commitments and Contingencies  Leases" in Zenith's 2004 Annual Report to
Stockholders, which is hereby incorporated by reference. Zenith considers its owned and leased facilities to be adequate for the needs of the organization.

Item 3. Legal Proceedings.

Zenith National and its subsidiaries are defendants in various litigation. In the opinion of management, after consultation with legal counsel, such litigation is
either without merit or the ultimate liability, if any, is not expected to have a material adverse effect on the consolidated financial condition, results of operations or cash flows of Zenith.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.

26

---





PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Zenith National's common stock, par value $1.00 per share, is traded on the New York Stock Exchange under the symbol ZNT. The table below sets forth the high and
low sales prices of the common stock for each quarterly period during the last two fiscal years.

Quarter

2004

2003First:High

$
40.95

$
24.22Low


32.07


19.15Second:High


50.64


30.23Low


38.72


21.30Third:High


51.29


29.65Low


41.67


26.00Fourth:High


51.13


32.85Low


37.20


27.81


As of February 14, 2005, there were 214 registered holders of record of Zenith National common stock.

The
table below sets forth information with respect to the amount and frequency of dividends declared on Zenith National common stock. Based upon Zenith's financial condition, it is
currently expected that cash dividends will continue to be paid in the future.

|Date of Declaration
by Zenith Board |  | Type and Amount of
Dividend |  | Record Date for
Payment |  | Payment Date     
|----------------------------------- |  | --------------------------- |  | ----------------------- |  | -----------------
|February 10, 2005                   |  | $0.33 cash per share        |  | April 29, 2005          |  | May 13, 2005     
|December 2, 2004                    |  | $0.28 cash per share        |  | January 31, 2005        |  | February 14, 2005
|September 2, 2004                   |  | $0.28 cash per share        |  | October 29, 2004        |  | November 12, 2004
|May 26, 2004                        |  | $0.28 cash per share        |  | July 30, 2004           |  | August 13, 2004  
|February 11, 2004                   |  | $0.28 cash per share        |  | April 30, 2004          |  | May 14, 2004     
|December 10, 2003                   |  | $0.25 cash per share        |  | January 30, 2004        |  | February 13, 2004
|September 3, 2003                   |  | $0.25 cash per share        |  | October 31, 2003        |  | November 14, 2003
|May 20, 2003                        |  | $0.25 cash per share        |  | July 31, 2003           |  | August 14, 2003  
|February 12, 2003                   |  | $0.25 cash per share        |  | April 30, 2003          |  | May 15, 2003     

The California and the Texas Insurance Holding Company System Regulatory Acts limit the ability of Zenith Insurance to pay dividends to Zenith
National, and of ZNAT Insurance and Zenith Star to pay dividends to Zenith Insurance, by providing that the appropriate insurance regulatory authorities in the states of California and Texas must
approve any dividend that, together with all other such dividends paid during the preceding twelve months, exceeds the greater of: (a) 10% of the paying company's statutory surplus as regards
policyholders at the preceding December 31; or (b) 100% of the net income for the preceding year. In addition, any such dividend must be paid from policyholders' surplus attributable to
accumulated earnings. Such restrictions on dividends are not cumulative. Zenith Insurance paid $20.0 million and $10.0 million in dividends to Zenith National in 2004 and 2003,
respectively. No such dividends were paid in 2002. In 2005, Zenith Insurance will be able to pay up to $91.5 million of dividends to Zenith National without prior approval of the California
Department of Insurance. The restrictions on the payment of dividends have not had, and under current regulations are not expected to have, a material adverse impact on the ability of Zenith Insurance
to pay dividends.

27

---



Item 6. Selected Financial Data.

The 5-Year Summary of Selected Financial Information included in Zenith's 2004 Annual Report to Stockholders is hereby incorporated by reference.

Item 7. Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations.

Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations included in Zenith's 2004 Annual Report to Stockholders is
hereby incorporated by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

The "Market Risk of Financial Instruments" section of the Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations
included in Zenith's 2004 Annual Report to Stockholders is hereby incorporated by reference.

Item 8. Financial Statements and Supplementary Data.

The Consolidated Financial Statements and Notes thereto included in Zenith's 2004 Annual Report to Stockholders is hereby incorporated by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Zenith's
management, with the participation of Zenith's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Zenith's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this
report. Based on such evaluation, Zenith's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Zenith's disclosure controls and procedures are
effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by Zenith in the reports that it files or submits under the Exchange Act and are
effective in ensuring that information required to be disclosed by Zenith in the reports that it files or submits under the Exchange Act is accumulated and communicated to Zenith's management,
including Zenith's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management's Report on Internal Control Over Financial Reporting.

Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) or 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control  Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework inInternal
Control  Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004.

28

---



Our
management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which is incorporated by reference herein.

Changes in Internal Control Over Financial Reporting.

There
have not been any changes in Zenith's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fourth quarter that have
materially affected, or are reasonably likely to materially affect, Zenith's internal control over financial reporting.

Item 9B. Other Information

None.

29

---



PART III

Item 10. Directors and Executive Officers of the Registrant.

The information set forth under the captions "Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," "Audit Committee," and
"Code of Ethics for Senior Financial Officers" in the Proxy Statement distributed to stockholders in connection with Zenith's 2005 Annual Meeting of Stockholders (the "Proxy Statement"), which is to
be filed by Zenith after the date this Annual Report on Form 10-K is filed, is hereby incorporated by reference.

Executive Officers of the Registrant

Name

Age

Position

Term

Executive
Officer
SinceStanley R. Zax

67

Chairman of the Board and President

Annual

1977Jack D. Miller

59

Executive Vice President

Annual

1998Keith E. Trotman

67

Executive Vice President

Annual

2005Robert E. Meyer

55

Senior Vice President and Actuary

Annual

2000William J. Owen

47

Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary

Annual

2000John J. Tickner

66

Senior Vice President and Secretary

Annual

1985


Each
of the executive officers is an officer of Zenith National and certain of its subsidiaries and each has occupied an executive position with Zenith National or a subsidiary of Zenith
National for more than five years.

There
are no family relationships between any of the executive officers, and there are no arrangements or understandings pursuant to which any of them were selected as officers.

Item 11. Executive Compensation.

The information set forth under the captions "Directors' Compensation," "Executive Compensation," "Summary Compensation Table," "Option/SAR Grants in Last Fiscal
Year," "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values," "Employment Agreements and Termination of Employment and Change in Control Arrangements"
and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement is hereby incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information set forth under the captions "Equity Compensation Plan Information" and "Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement is hereby incorporated by reference.

Item 13. Certain Relationships and Related Transactions.

The information set forth in footnote 1 to the table set forth under the caption "Election of Directors" and under the caption "Certain Transactions with
Fairfax Financial" in the Proxy Statement is hereby incorporated by reference.

Item 14. Principal Accountant Fees and Services.

The information set forth under the captions, "Audit Fees," "Audit-Related Fees," "Tax Fees," "All Other Fees" and "Pre-Approval of Independent
Auditors' Services" in the Proxy Statement is hereby incorporated by reference.

30

---





PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)   Documents
filed as part of the report:



31

---







|2.1 |  | Stock Acquisition Agreement, dated as of September 19, 1995, between Anchor National Life Insurance Company and Zenith National Insurance Corp. (Incorporated herein by reference to Exhibit 2.1 to Zenith's Report
on Form 8-K dated October 6, 1995.)                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.2 |  | 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. (Incorporated herein by reference to
Exhibit 2.1 to Zenith's Report on Form 8-K dated January 9, 1996.)                                                   
|3.1 |  | Certificate of Incorporation of Zenith National Insurance Corp., dated May 28, 1971. (Incorporated herein by reference to Exhibit 3.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)                                                                                                                                              
|3.2 |  | Certificate of Amendment of Certificate of Incorporation of Zenith National Insurance Corp., dated September 12, 1977. (Incorporated herein by reference to Exhibit 3.2 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                            
|3.3 |  | Certificate of Amendment of Certificate of Incorporation of Zenith National Insurance Corp., dated May 31, 1979. (Incorporated herein by reference to Exhibit 3.3 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                                  
|3.4 |  | Certificate of Amendment of Certificate of Incorporation of Zenith National Insurance Corp., dated September 6, 1983. (Incorporated herein by reference to Exhibit 3.4 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                             
|3.5 |  | Certificate of Designation of Zenith National Insurance Corp., dated September 10, 1985. (Incorporated herein by reference to Exhibit 3.5 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)                                                                                                                                          
|3.6 |  | Certificate of Amendment of Certificate of Incorporation of Zenith National Insurance Corp., dated November 22, 1985. (Incorporated herein by reference to Exhibit 3.6 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                             
|3.7 |  | Certificate of Amendment of Certificate of Incorporation of Zenith National Insurance Corp., dated May 19, 1987. (Incorporated herein by reference to Exhibit 3.7 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                                  
|3.8 |  | Certificate of Change of Address of Registered Office and of Registered Agent of Zenith National Insurance Corp., dated October 10, 1989. (Incorporated herein by reference to Exhibit 3.8 to Zenith's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000.)                                                                                         
|3.9 |  | By-laws of Zenith National Insurance Corp., as currently in effect. (Incorporated herein by reference to Exhibit 3.9 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                               
|4.1 |  | Indenture, dated July 30, 1998, between Zenith National Insurance Corp. and Norwest Bank Minnesota, National Association, as trustee, pursuant to which Zenith issued its 8.55% Subordinated Deferrable Interest Debentures. (Incorporated herein by
reference to Exhibit 10.6 to Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.)
|    |  |                                                                                                                                                                                                                                                                                                                                                                    

32

---



|4.2  |  | Amended and Restated Declaration of Trust of Zenith National Insurance Capital Trust I, dated July 30, 1998, between Zenith National Insurance Corp., the trustees and the holders. (Incorporated herein by reference to Exhibit 10.8 to
Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.)                                                                                               
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3  |  | Certificate of Amendment to Certificate of Trust of Zenith National Insurance Capital Trust I, dated March 1, 2000. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.)                                                                                                                                                                    
|4.4  |  | Indenture, dated March 21, 2003, by and between Zenith National Insurance Corp. and Wells Fargo Bank Minnesota, N.A., as Trustee. (Incorporated herein by reference to Exhibit 99.2 to Zenith's Current Report on Form 8-K dated
March 21, 2003.)                                                                                                                                                                        
|4.5  |  | Registration Rights Agreement, dated March 21, 2003, by and between Zenith National Insurance Corp. and the Initial Purchasers named therein. (Incorporated herein by reference to Exhibit 99.3 to Zenith's Current Report on Form 8-K
dated March 21, 2003.)                                                                                                                                                            
|10.1 |  | Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm Insurance Agency, dated December 31, 1990. (Incorporated
herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                 
|10.2 |  | Amendment No. 1, dated December 28, 1993, to the Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm
Insurance Agency, dated December 31, 1990. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)
|10.3 |  | Amendment No. 2, dated December 28, 1995, to the Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm
Insurance Agency, dated December 31, 1990. (Incorporated herein by reference to Exhibit 10.3 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)
|10.4 |  | Amendment No. 3, dated January 7, 1998, to the Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm
Insurance Agency, dated December 31, 1990. (Incorporated herein by reference to Exhibit 10.4 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)  
|10.5 |  | Amendment No. 4, dated July 15, 1998, to the Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm
Insurance Agency, dated December 31, 1990. (Incorporated herein by reference to Exhibit 10.5 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                          

33

---



|10.6  |  | Amendment No. 5, dated March 31, 1999, to the Cost Allocation Agreement between Zenith National Insurance Corp., Zenith Insurance Company, ZNAT Insurance Company, CalFarm Insurance Company, CalFarm Life Insurance Company, and CalFarm
Insurance Agency, dated December 31, 1990. (Incorporated herein by reference to Exhibit 10.6 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                 
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7  |  | Amended and Restated Tax Sharing Agreement by, between and among Zenith National Insurance Corp. and its subsidiaries, Zenith Insurance Company, CalRehab Services, Inc., CalFarm Insurance Company, CalFarm Insurance Agency, Cal-Ag Insurance
Services, Inc., CalFarm Annuity Services Company, ZNAT Insurance Company and CalFarm Life Insurance Company, dated January 1, 1991. (Incorporated herein by reference to Exhibit 10.7 to Zenith's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002.)                                                  
|10.8  |  | Amendment No. 1, dated December 28, 1995, to the Amended and Restated Tax Sharing Agreement, by, between and among Zenith National Insurance Corp. and its subsidiaries, Zenith Insurance Company, CalRehab Services, Inc., CalFarm
Insurance Company, CalFarm Insurance Agency, Cal-Ag Insurance Services, Inc., CalFarm Annuity Services Company, ZNAT Insurance Company and CalFarm Life Insurance Company, dated January 1, 1991. (Incorporated herein by reference to
Exhibit 10.8 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)
|10.9  |  | Amendment No. 2, dated March 31, 1999, to the Amended and Restated Tax Sharing Agreement, by, between and among Zenith National Insurance Corp. and its subsidiaries, Zenith Insurance Company, CalRehab Services, Inc., CalFarm Insurance
Company, CalFarm Insurance Agency, Cal-Ag Insurance Services, Inc., CalFarm Annuity Services Company, ZNAT Insurance Company and CalFarm Life Insurance Company, dated January 1, 1991. (Incorporated herein by reference to Exhibit 10.9
to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)   
|10.10 |  | Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993. (Incorporated herein by reference to Exhibit 10.10 to
Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                                                                                                               
|10.11 |  | Amendment No. 1, dated January 25, 1995, to the Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993.
(Incorporated herein by reference to Exhibit 10.11 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                                                               
|10.12 |  | Amendment No. 2, dated January 1, 1997, to the Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993.
(Incorporated herein by reference to Exhibit 10.12 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                                                                
|10.13 |  | Amendment No. 3, dated July 15, 1998, to the Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993.
(Incorporated herein by reference to Exhibit 10.13 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                                                                                                                                                                                  
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

34

---



|10.14 |  | Amendment No. 4, dated March 31, 1999, to the Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993.
(Incorporated herein by reference to Exhibit 10.14 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                                  
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15 |  | Amendment No. 5, dated July 8, 2003, to the Reinsurance and Pooling Agreement between Zenith Insurance Company and CalFarm Insurance Company, ZNAT Insurance Company, and Zenith Star Insurance Company, dated December 28, 1993.
(Incorporated herein by reference to Exhibit 10.15 to Zenith's Annual Report on Form 10-K/A for the year ended December 31, 2003.)                                    
|10.16 |  | Purchase Agreement, dated February 4, 1981, among Reliance Insurance Company, Zenith National Insurance Corp., the Selling Stockholders referred to therein, and Eugene V. Klein, Daniel Schwartz and Harvey L. Silbert as agents for the
Selling Stockholders. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Annual Report on Form 10-K for the year ended December 31, 2001.)         
|10.17 |  | Master Transaction Agreement, dated as of October 7, 2002, by and among Meritage Corporation, a Maryland corporation; MTH-Homes Nevada, Inc., an Arizona corporation; Perma-Bilt, A Nevada Corporation; and Zenith National Insurance Corp., a
Delaware corporation. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Current Report on Form 8-K dated October 8, 2002.)                   
|10.18 |  | Agreement of Purchase and Sale of Assets, dated as of October 7, 2002, by and among Meritage Corporation, a Maryland corporation; MTH-Homes Nevada, Inc., an Arizona corporation; Perma-Bilt, A Nevada Corporation; and Zenith National
Insurance Corp., a Delaware corporation. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Current Report on Form 8-K dated October 8, 2002.)       
|10.19 |  | Agreement of Purchase and Sale of Real Property, dated as of October 7, 2002, by and among Meritage Corporation, a Maryland corporation; MTH-Homes Nevada, Inc., an Arizona corporation; Perma-Bilt, A Nevada Corporation; and Zenith National
Insurance Corp., a Delaware corporation. (Incorporated herein by reference to Exhibit 10.3 to Zenith's Current Report on Form 8-K dated October 8, 2002.)
|10.20 |  | Indemnification Agreement, dated as of October 7, 2002, by and among Meritage Corporation, a Maryland corporation; MTH-Homes Nevada, Inc., an Arizona corporation; Perma-Bilt, A Nevada Corporation; and Zenith National Insurance Corp., a
Delaware corporation. (Incorporated herein by reference to Exhibit 10.4 to Zenith's Current Report on Form 8-K dated October 8, 2002.)                      
|10.21 |  | Non-Disclosure and Non-Compete Agreement, dated as of October 7, 2002, by and among Meritage Corporation, a Maryland corporation; MTH-Homes Nevada, Inc., an Arizona corporation; Zenith National Insurance Corp., a Delaware corporation; and
Perma-Bilt, A Nevada Corporation. (Incorporated herein by reference to Exhibit 10.5 to Zenith's Current Report on Form 8-K dated October 8, 2002.)       
|10.22 |  | Agreement Regarding Purchase Price and Indemnification, dated as of October 7, 2002, by and among Zenith National Insurance Corp., a Delaware corporation, Perma-Bilt, a Nevada Corporation and Daniel Schwartz. (Incorporated herein by reference to
Exhibit 10.6 to Zenith's Current Report on Form 8-K dated October 8, 2002.)                                                                       
|10.23 |  | Stock Purchase Agreement, dated February 22, 1999, between Zenith Insurance Company and Nationwide Mutual Insurance Company. (Incorporated herein by reference to Zenith's Current Report on Form 8-K dated March 9, 1999.)                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                         

35

---



|10.24  |  | Stock Purchase Agreement, dated as of November 21, 2001, between Zenith National Insurance Corp. and Odyssey Reinsurance Corporation. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Current Report on Form 8-K dated
December 6, 2001.)                                                                 
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.25 |  | Zenith National Insurance Corp. 1996 Employee Stock Option Plan, approved by the Stockholders on May 22, 1996. (Incorporated herein by reference to Exhibit 10.5 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.)                                                                        
|*10.26 |  | Amendment No. 1, dated December 8, 1998, to Zenith National Insurance Corp. 1996 Employee Stock Option Plan. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999.)                                                                          
|*10.27 |  | Amendment No. 2, dated May 24, 2001, to Zenith National Insurance Corp. 1996 Employee Stock Option Plan. (Incorporated herein by reference to Exhibit 10.14 to Zenith's Annual Report on Form 10-K for the year ended December 31,
 2001.)                                                                              
|*10.28 |  | 1996 Employee Stock Option Plan, Form of Stock Option Agreement.                                                                                                                                                                                                                                                        
|*10.29 |  | Stock Option Agreement, dated March 15, 1996, between Zenith and Stanley R. Zax. (Incorporated herein by reference to Exhibit 10.3 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).                                                                                                      
|*10.30 |  | Zenith National Insurance Corp. 2004 Restricted Stock Plan. (Incorporated herein by reference to Exhibit 4.1 to Zenith's Registration Statement on Form S-8, Registration No. 333-115902, filed with the Securities and Exchange
Commission on May 26, 2004.)                                                           
|*10.31 |  | Zenith National Insurance Corp. 2004 Restricted Stock Plan, Form of Restricted Stock Award Agreement. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Report on Form 8-K dated December 3, 2004.)                                                                                                         
|*10.32 |  | Employment Agreement, executed November 1, 2004, between Zenith National Insurance Corp. and Jack D. Miller. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Report on Form 8-K dated October 12, 2004.)                                                                                                  
|*10.33 |  | Employment Agreement, executed November 1, 2004, between Zenith National Insurance Corp. and Robert E. Meyer. (Incorporated herein by reference to Exhibit 10.3 to Zenith's Report on Form 8-K dated October 12, 2004.)                                                                                                 
|*10.34 |  | Employment Agreement, executed November 1, 2004, between Zenith National Insurance Corp. and William J. Owen. (Incorporated herein by reference to Exhibit 10.4 to Zenith's Report on Form 8-K dated October 12, 2004.)                                                                                                 
|*10.35 |  | Employment Agreement, dated January 5, 1998, between Zenith National Insurance Corp. and John J. Tickner. (Incorporated herein by reference to Exhibit 10.9 to Zenith's Annual Report on Form 10-K for the year ended December 31,
 1997.)                                                                              
|*10.36 |  | Amendment No. 2, dated as of September 17, 2002, to Employment Agreement, dated and effective as of January 5, 1998, between Zenith National Insurance Corp. and John J. Tickner. (Incorporated herein by reference to
Exhibit 10.3 to Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002.)
|*10.37 |  | Restated and Amended Employment Agreement, executed March 13, 2001, between Zenith National Insurance Corp. and Stanley R. Zax. (Incorporated herein by reference to Exhibit 10.18 to Zenith's Annual Report on Form 10-K for the year
ended December 31, 2000.)                                                        
|       |  |                                                                                                                                                                                                                                                                                                                         

36

---



|*10.38 |  | Amendment No. 1 to the Restated and Amended Employment Agreement between Zenith National Insurance Corp. and Stanley R. Zax. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Report on Form 8-K dated October 12,
2004.)                                                                                                                                                                                
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.39 |  | Amended and Restated Zenith National Insurance Corp. Executive Officer Bonus Plan dated February 12, 2003. (Incorporated herein by reference to Exhibit 10.5 to Zenith's Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.)                                                                                                                                                                         
|*10.40 |  | Zenith National Insurance Corp. 2003 Non-Employee Director Deferred Compensation Plan dated May 20, 2003. (Incorporated herein by reference to Exhibit 10.38 to Zenith's Registration Statement on Form S-1 filed July 18,
2003.)                                                                                                                                                                                     
|*10.41 |  | Amendment No. 1 to Zenith National Insurance Corp. 2003 Non-Employee Director Deferred Compensation Plan dated May 20, 2003. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Report on Form 8-K dated
December 3, 2004.)                                                                                                                                                                                
|*10.42 |  | 2003 Non-Employee Director Deferred Compensation Plan, Form of Deferred Compensation Agreement.                                                                                                                                                                                                                                                                                                                       
|*10.43 |  | Description of Compensation Arrangement for members of the Board of Directors.                                                                                                                                                                                                                                                                                                                                        
|10.44  |  | Aggregate Excess of Loss Reinsurance Agreement between Associated General Commerce Self-Insurers' Trust Fund (now part of Zenith Insurance Company) and Reliance Insurance Company effective December 31, 1991. (Incorporated herein by reference to
Exhibit 10.24 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1996.)                                                                      
|10.45  |  | Specific Excess Workers' Compensation and Employers' Liability Policy between Planet Insurance Company (now Reliance National Indemnity Company) and Associated General Contractors of Florida Self Insurance Fund (now part of Zenith Insurance Company)
effective January 1, 1993. (Incorporated herein by reference to Exhibit 10.25 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1996.) 
|10.46  |  | Aggregate Excess of Loss Reinsurance Agreement, dated August 1, 1998, between Zenith National Insurance Group and Inter-Ocean Reinsurance Company LTD. (Incorporated herein by reference to Exhibit 10.32 to Zenith's Annual Report on
Form 10-K for the year ended December 31, 1998.)                                                                                                                               
|10.47  |  | Special Endorsement to Retrocessional Agreement, dated August 1, 1998, between American Re-Insurance Company, Inter-Ocean Reinsurance Company LTD., and Zenith Insurance Company, CalFarm Insurance Company, ZNAT Insurance Company and Zenith
Star Insurance Company. (Incorporated herein by reference to Exhibit 10.28 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1999.)               
|10.48  |  | Termination Endorsement Number 1 to Retrocessional Agreement, dated December 22, 1999, between American Re-Insurance Company, Inter-Ocean Reinsurance Company LTD, and Zenith Insurance Company, CalFarm Insurance Company, ZNAT Insurance Company
and Zenith Star Insurance Company. (Incorporated herein by reference to Exhibit 10.29 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1999.)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                       

37

---



|10.49 |  | Endorsement Number 1 to Aggregate Excess of Loss Reinsurance Agreement, dated December 22, 1999, between Zenith National Insurance Group, CalFarm Insurance Company, ZNAT Insurance Company and Zenith Star Insurance Company and Inter-Ocean
Reinsurance Company LTD. (Incorporated herein by reference to Exhibit 10.30 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.50 |  | Trust Agreement, dated December 18, 1998, between Inter-Ocean Reinsurance Company LTD and Zenith Insurance Company, CalFarm Insurance Company, ZNAT Insurance Company and Zenith Star Insurance Company. (Incorporated herein by reference to
Exhibit 10.34 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1998.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.51 |  | Trust Agreement, dated October 5, 2001, among American Re-Insurance Company (as Grantor), Zenith Insurance Company, ZNAT Insurance Company and Zenith Star Insurance Company (collectively, as Beneficiary), and State Street Bank and Trust Company
(as Trustee). (Incorporated herein by reference to Exhibit 10.32 to Zenith's Annual Report on Form 10-K for the year ended December 31, 2001.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.52 |  | Workers' Compensation Catastrophe Excess of Loss Reinsurance Contract, dated January 1, 2004, between Zenith Insurance Company, ZNAT Insurance Company and Zenith Star Insurance Company and Aspen Insurance U.K. Limited, Ace Tempest Re
U.S.A. Inc., Ace Tempest Reinsurance Limited, Allied World Assurance Company Limited, Arch Reinsurance Company, AXIS Specialty Limited, Endurance Specialty Insurance Limited, Everest Reinsurance Company, Folksamerica Reinsurance Company,
Hannover Ruckversicherungs AG, IOA Re U.S., Liberty Mutual Insurance Company, Odyssey Reinsurance Company, Swiss Re Underwriting U.S., Transatlantic Reinsurance Company, XL Reinsurance America Inc. and various Lloyd's Underwriting Syndicates.
(Incorporated herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.)
|10.53 |  | Workers' Compensation Terrorism Catastrophe Excess of Loss Reinsurance Contract, dated January 1, 2004, between Zenith Insurance Company, ZNAT Insurance Company and Zenith Star Insurance Company and Aspen Insurance U.K. Limited, Ace Tempest Re
U.S.A. Inc., Ace Tempest Reinsurance Limited, Arch Reinsurance Company, AXIS Specialty Limited, Swiss Re Underwriting U.S. and various Lloyd's Underwriting Syndicates. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2004.)                                                                                                                                                                                                                                                                                                               
|10.54 |  | Agreement of Reinsurance #8051 between General Reinsurance Corporation and Zenith Insurance Company, ZNAT Insurance Company, Zenith Star Insurance Company and CalFarm Insurance Company, et. al. dated May 22, 1995. (Incorporated herein by
reference to Exhibit 10.13 to Zenith's Annual Report on Form 10-K for the year ended December 31, 1995.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.55 |  | Endorsement No. 11, effective January 1, 2002, to Agreement of Reinsurance 8051 between General Reinsurance Corporation and Zenith Insurance Company, ZNAT Insurance Company, Zenith Star Insurance Company and CalFarm Insurance Company, et.
al., dated as of May 22, 1995. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.)                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.56 |  | Workers' Compensation and Employers' Liability Reinsurance Agreement between Zenith Insurance Company and Employers Reinsurance Corporation, effective January 1, 1986. (Incorporated herein by reference to Exhibit 10.14 to Zenith's Annual
Report on Form 10-K for the year ended December 31, 1991.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

38

---



|10.57 |  | Workers' Compensation and Employers' Liability Excess of Loss Reinsurance Agreement between Employers Reinsurance Corporation of Overland Park, Kansas, Zenith Insurance Company and ZNAT Insurance Company, both of Woodland Hills, California, and
Zenith Star Insurance Company of Austin, Texas, dated as of July 1, 2002. (Incorporated herein by reference to Exhibit 10.21 to Zenith's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.)                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.58 |  | Workers' Compensation Quota Share Reinsurance Agreement between Zenith Insurance Company, ZNAT Insurance Company, Zenith Star Insurance Company (collectively, as cedant) and Odyssey America Reinsurance Corporation (as Reinsurer) dated
December 28, 2001. (Incorporated herein by reference to Exhibit 10.36 to Zenith's Annual Report on Form 10-K for the year ended December 31, 2001.)                                                                                         
|10.59 |  | Promissory Note, dated August 9, 2002, from Zenith National Insurance Corp. to City National Bank. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30,
2002.)                                                                                                                                                                                                                                              
|10.60 |  | Change in Terms Agreement, dated July 22, 2004, between Zenith National Insurance Corp., a Delaware corporation, and City National Bank, N.A. (Incorporated herein by reference to Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004.)                                                                                                                                                                                                   
|10.61 |  | Amended and Restated Credit Agreement, dated as of September 30, 2002, between Zenith National Insurance Corp., and Bank of America, N.A. (Incorporated herein by reference to Exhibit 10.4 to Zenith's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2002.)                                                                                                                                                                                                       
|10.62 |  | Waiver and Amendment, dated March 19, 2003, between Zenith National Insurance Corp. and Bank of America, N.A. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003.)                                                                                                                                                                                                                                       
|10.63 |  | Waiver and Amendment, dated September 5, 2003, between Zenith National Insurance Corp., a Delaware corporation, and Bank of America, N.A. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2003.)                                                                                                                                                                                                       
|10.64 |  | Third Amendment entered into as of October 29, 2004 to the Amended and Restated Credit Agreement, dated as of September 30, 2002, between Zenith National Insurance Corp., and Bank of America, N.A. dated as of September 30, 2002. (Incorporated
herein by reference to Exhibit 10.1 to Zenith's Current Report on Form 8-K dated October 29, 2004.)                                                                                                                                 
|10.65 |  | Capital Securities Guarantee Agreement, dated July 30, 1998, between Zenith National Insurance Corp. and Norwest Bank Minnesota, National Association. (Incorporated herein by reference to Exhibit 10.7 to Zenith's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998.)                                                                                                                                                                                          
|10.66 |  | Purchase Agreement between Zenith National Insurance Corp., Zenith National Insurance Capital Trust I, Credit Suisse First Boston Corporation, BancAmerica Robertson Stephens and Donaldson, Lufkin & Jenrette Securities Corporation, dated
July 27, 1998, for $75,000,000 Zenith National Insurance Capital Trust I 8.55% Capital Securities. (Incorporated herein by reference to Exhibit 10.9 to Zenith's Quarterly Report on Form 10-Q for the quarter ended September 30,
 1998.)
|10.67 |  | Standstill Agreement, dated June 30, 1999, between Zenith National Insurance Corp. and Fairfax Financial Holdings Limited. (Incorporated herein by reference to Exhibit 10.3 to Zenith's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.)                                                                                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

39

---



|10.68 |  | Amendment No. 1, executed March 21, 2003, to the Standstill Agreement, date June 30, 1999, between Zenith National Insurance Corp. and Fairfax Financial Holdings Limited, a Canada corporation. (Incorporated herein by reference to
Exhibit 10.1 to Zenith's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.69 |  | Registration and Indemnification Agreement, dated as of June 14, 2004, between Zenith National Insurance Corp. and Fairfax Financial Holdings Limited. (Incorporated herein by reference to Exhibit 10.2 to Zenith's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004.)                                           
|11    |  | Statement re computation of per share earnings. (Incorporated herein by reference to Notes to Consolidated Financial Statements  Note 14  "Earnings and Dividends Per Share" in Zenith's 2004 Annual Report to Stockholders.)                                                                                                    
|12    |  | Statement re computation of ratio of earnings to fixed charges.                                                                                                                                                                                                                                                                    
|13    |  | Zenith's Annual Report to Stockholders for the year ended December 31, 2004, but only to the extent such report is expressly incorporated by reference herein, and such report is not otherwise to be deemed "filed" as a part of this Annual Report
on Form 10-K.                                                                 
|21    |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                    
|23.1  |  | Consent of PricewaterhouseCoopers LLP, dated February 17, 2005. (Incorporated herein by reference to page F-1 of this Annual Report on Form 10-K.)                                                                                                                                                                                 
|31.1  |  | Certification of the CEO pursuant to Exchange Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                                                                                                                    
|31.2  |  | Certification of the CFO pursuant to Exchange Rule 13a-14(a) or Rule 15d-14(a).                                                                                                                                                                                                                                                    
|32    |  | Certification of the CEO and CFO pursuant to 18 U.S.C. section 1350.                                                                                                                                                                                                                                                               

---

*Management
contract or compensatory plan or arrangement

40

---





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on February 17, 2005.

| |  |                                 |  |                                                                    
| |  | ------------------------------- |  | -------------------------------------------------------------------
| |  | ZENITH NATIONAL INSURANCE CORP.
| |  | By:                             |  | /s/STANLEY R. ZAXStanley R. Zax
Chairman of the Board and President

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated, on February 17, 2005.

|/s/STANLEY R. ZAXStanley R. Zax               |  | Chairman of the Board, President and Director
(Principal Executive Officer)                   
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|/s/MAX M. KAMPELMANMax M. Kampelman           |  | Director                                                                                      
|/s/ROBERT J. MILLERRobert J. Miller           |  | Director                                                                                      
|/s/LEON E. PANETTALeon E. Panetta             |  | Director                                                                                      
|/s/CATHERINE B. REYNOLDSCatherine B. Reynolds |  | Director                                                                                      
|/s/ALAN I. ROTHENBERGAlan I. Rothenberg       |  | Director                                                                                      
|/s/WILLIAM S. SESSIONSWilliam S. Sessions     |  | Director                                                                                      
|/s/GERALD TSAI, JR.Gerald Tsai, Jr.           |  | Director                                                                                      
|/s/MICHAEL WM. ZAVISMichael Wm. Zavis         |  | Director                                                                                      
|/s/WILLIAM J. OWENWilliam J. Owen             |  | Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

41

---



Table of ContentsZenith National Insurance Corp. and Subsidiaries
Index to Financial Statements, Schedules and Exhibits

|                                                                                         |  |                                                                                          |  | Page
|---------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ----
|                                                                                         |  |                                                                                          |  |     
|Consent of Independent Registered Public Accounting Firm                                 |  | F-1                                                                                     
|Report of Independent Registered Public Accounting Firm on Financial Statement Schedules |  | F-2                                                                                     
|Financial Statement Schedules                                                            |  |                                                                                         
|I                                                                                        |  | Summary of Investments  Other Than Investments in Related Parties                       |  | F-3 
|II                                                                                       |  | Condensed Financial Information of Registrant (Parent Company)                           |  | F-4 
|                                                                                         |  | Balance Sheets                                                                           |  | F-4 
|                                                                                         |  | Statements of Operations                                                                 |  | F-5 
|                                                                                         |  | Statements of Cash Flows                                                                 |  | F-6 
|                                                                                         |  | Notes to Condensed Financial Information of Registrant                                   |  | F-7 
|III                                                                                      |  | Supplemental Insurance Information                                                       |  | F-13
|IV                                                                                       |  | Reinsurance                                                                              |  | F-14
|V                                                                                        |  | Valuation and Qualifying Accounts                                                        |  | F-14
|VI                                                                                       |  | Supplementary Information Concerning Consolidated Property-Casualty Insurance Operations |  | F-15

42

---





CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-107170) and on Form S-8 (File
Nos. 33-8948, 33-22219, 333-04399, 333-79199, 333-62798 and 333-115902) of Zenith National Insurance Corp. of our report dated February 17, 2005 relating to the consolidated financial
statements, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in the 2004
Annual Report to Stockholders, which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 17,
2005 relating to the financial statement schedules, which appears in this Form 10-K.

PricewaterhouseCoopers
LLP
Los Angeles, California
February 17, 2005

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  ON FINANCIAL STATEMENT SCHEDULES

To
the Board of Directors of
    Zenith National Insurance Corp.:

Our
audits of the consolidated financial statements, of management's assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over
financial reporting referred to in our report dated February 17, 2005 appearing in the 2004 Annual Report to Stockholders of Zenith National Insurance Corp. (which report, consolidated financial
statements and assessment are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In
our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial
statements.

PricewaterhouseCoopers
LLP
Los Angeles, California
February 17, 2005

F-2

---





SCHEDULE I  SUMMARY OF INVESTMENTS         OTHER THAN INVESTMENTS IN RELATED PARTIES        ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES        December 31, 2004

|Column A                   |                             | Column B                                                         |         | Column C                        |         | Column D
|-------------------------- | --------------------------- | ---------------------------------------------------------------- | ------- | ------------------------------- | ------- | --------
|
|
|Fixed maturity securities: |                             |                                                                  |         |                                 |         |         
|                           | Bonds:                      |                                                                  |         |                                 |         |         
|                           |                             | United States Government and government agencies and authorities |         | $                               | 436,274 |         
|                           |                             | Public utilities                                                 |         |                                 | 35,442  |         
|                           |                             | States, municipalities and political subdivisions                |         |                                 | 127,378 |         
|                           |                             | Foreign governments                                              |         |                                 | 5,000   |         
|                           |                             | Industrial and miscellaneous                                     |         |                                 | 600,878 |         
|                           | Redeemable preferred stocks |                                                                  |         | 24,741                          |         |         
|                           |                             |                                                                  |         |                                 |         |         
|                           |                             |                                                                  |         | Total fixed maturity securities |         |         
|Equity securities:         |                             |                                                                  |         |                                 |         |         
|                           | Preferred stocks            |                                                                  |         | 4,732                           |         |         
|                           | Common stocks:              |                                                                  |         |                                 |         |         
|                           |                             | Industrial, misc. and all other                                  |         |                                 | 51,713  |         
|                           |                             | Banks, trust and insurance companies                             |         |                                 | 6,517   |         
|                           |                             |                                                                  |         |                                 |         |         
|                           |                             |                                                                  |         | Total equity securities         |         |         
|Mortgage loans             |                             |                                                                  | 12,645  |                                 |         | 12,645  
|Short-term investments     |                             |                                                                  | 492,126 |                                 |         | 492,126 
|Other investments          |                             |                                                                  | 40,146  |                                 |         | 40,146  
|                           |                             |                                                                  |         |                                 |         |         
|                           |                             |                                                                  |         | Total investments               |         | $       
|                           |                             |                                                                  |         |                                 |         |         

---

F-3

---





SCHEDULE II  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)    ZENITH NATIONAL INSURANCE CORP.    BALANCE SHEETS

|                                                                                                                                         |                                                                                      | December 31, |         
|---------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------ | --------
|
|ASSETS                                                                                                                                   |                                                                                     
|Investments:                                                                                                                             |                                                                                      |              |         
|                                                                                                                                         | Fixed maturity investments, at fair value (cost $29,817 in 2004 and $53,361 in 2003) |              | $       
|                                                                                                                                         | Equity securities, at fair value (cost $1,319 in 2004 and $932 in 2003)              |              |         
|                                                                                                                                         | Short-term investments (at cost or amortized cost, which approximates fair value)    |              |         
|                                                                                                                                         |                                                                                      |              |         
|Total investments                                                                                                                        |                                                                                      |              | 63,618  
|Cash                                                                                                                                     |                                                                                      |              | 328     
|Investment in subsidiaries                                                                                                               |                                                                                      |              | 627,972 
|Other assets                                                                                                                             |                                                                                      |              | 24,160  
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|LIABILITIES                                                                                                                              |                                                                                     
|Convertible senior notes payable, less unamortized discount of $3,447 in 2004 and $3,981 in 2003                                         |                                                                                      | $            | 121,548 
|Subordinated debentures, less unamortized discount of $222 in 2004 and $231 in 2003                                                      |                                                                                      |              | 77,098  
|Dividend payable to stockholders                                                                                                         |                                                                                      |              | 5,421   
|Income tax payable                                                                                                                       |                                                                                      |              | 4,058   
|Other liabilities                                                                                                                        |                                                                                      |              | 5,806   
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|Commitments and contingencies (Note 3)                                                                                                   |                                                                                      |              |         
|STOCKHOLDERS' EQUITY                                                                                                                     |                                                                                     
|Preferred stock, $1 par  1,000 shares authorized; none issued or outstanding, in 2004 and 2003                                          |                                                                                      |              |         
|Common stock, $1 par  50,000 shares authorized; issued 26,510 in 2004 and 25,928 in 2003; outstanding 19,371 in 2004 and 18,910 in 2003 |                                                                                      |              | 26,510  
|Additional paid-in capital                                                                                                               |                                                                                      |              | 318,850 
|Retained earnings                                                                                                                        |                                                                                      |              | 254,682 
|Unearned compensation                                                                                                                    |                                                                                      |              | (4,588  
|Accumulated other comprehensive income                                                                                                   |                                                                                      |              | 43,583  
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              | 639,037 
|Treasury stock, at cost (7,139 shares in 2004 and 7,018 shares in 2003)                                                                  |                                                                                      |              | (136,890
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         
|                                                                                                                                         |                                                                                      |              |         

The
accompanying notes are an integral part of these statements.

F-4

---





SCHEDULE II  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)        ZENITH NATIONAL INSURANCE CORP.        STATEMENTS OF OPERATIONS

|                                                                                                             |                | Year Ended December 31, |        
|------------------------------------------------------------------------------------------------------------ | -------------- | ----------------------- | -------
|
|Net investment income                                                                                        |                | $                       | 2,471  
|Realized gains on investments                                                                                |                |                         | 39     
|                                                                                                             |                |                         |        
|                                                                                                             | Total revenues |                         |        
|                                                                                                             |                |                         |        
|Operating expenses                                                                                           |                |                         | 6,000  
|Interest expense                                                                                             |                |                         | 13,250 
|                                                                                                             |                |                         |        
|                                                                                                             | Total expenses |                         |        
|                                                                                                             |                |                         |        
|Loss from continuing operations before income tax benefit and equity in income of subsidiaries               |                |                         | (16,740
|Income tax benefit                                                                                           |                |                         | (8,685 
|                                                                                                             |                |                         |        
|Loss from continuing operations before equity in income of subsidiaries                                      |                |                         | (8,055 
|Gain on sale of discontinued real estate segment, net of income tax expense of $692 in 2004 and $621 in 2003 |                |                         | 1,286  
|                                                                                                             |                |                         |        
|Loss before equity in income of subsidiaries                                                                 |                |                         | (6,769 
|Equity in income of subsidiaries                                                                             |                |                         | 125,769
|                                                                                                             |                |                         |        
|Net income                                                                                                   |                | $                       | 119,000
|                                                                                                             |                |                         |        

The
accompanying notes are an integral part of these statements.

F-5

---





SCHEDULE II  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)    ZENITH NATIONAL INSURANCE CORP.    STATEMENTS OF CASH FLOWS

|                                                                          |                                                        | Year Ended December 31,                      |    
|------------------------------------------------------------------------- | ------------------------------------------------------ | -------------------------------------------- | ---
|
|Cash flows from operating activities:                                     |                                                        |                                              |    
|                                                                          | Investment income received                             |                                              | $  
|                                                                          | Operating expenses paid                                |                                              |    
|                                                                          | Interest paid                                          |                                              |    
|                                                                          | Income tax recovered                                   |                                              |    
|                                                                          |                                                        |                                              |    
|                                                                          | Net cash used in operating activities                  |                                              | $  
|                                                                          |                                                        |                                              |    
|Cash flows from investing activities:                                     |                                                        |                                              |    
|                                                                          | Purchases of investments:                              |                                              |    
|                                                                          |                                                        | Fixed maturity securities available-for-sale |    
|                                                                          |                                                        | Equity securities available-for-sale         |    
|                                                                          | Proceeds from sales of investments:                    |                                              |    
|                                                                          |                                                        | Fixed maturity securities available-for-sale |    
|                                                                          |                                                        | Equity securities available-for-sale         |    
|                                                                          | Net (increase) decrease in short-term investments      |                                              |    
|                                                                          | Dividends received from Zenith Insurance               |                                              |    
|                                                                          | Cash contribution to Zenith Insurance                  |                                              |    
|                                                                          | Proceeds from sale of discontinued real estate segment |                                              |    
|                                                                          | Other, net                                             |                                              |    
|                                                                          |                                                        |                                              |    
|                                                                          | Net cash provided by (used in) investing activities    |                                              |    
|                                                                          |                                                        |                                              |    
|Cash flows from financing activities:                                     |                                                        |                                              |    
|                                                                          | Net proceeds from issuance of convertible senior notes |                                              |    
|                                                                          | Repayment of Senior Notes Payable                      |                                              |    
|                                                                          | Cash advanced from bank lines of credit                |                                              |    
|                                                                          | Cash repaid on bank lines of credit                    |                                              |    
|                                                                          | Cash dividends paid to common stockholders             |                                              |    
|                                                                          | Proceeds from exercise of stock options                |                                              |    
|                                                                          | Repurchase of Capital Securities due 2028              |                                              |    
|                                                                          | Net cash (to) from subsidiary                          |                                              |    
|                                                                          |                                                        |                                              |    
|                                                                          | Net cash (used in) provided by financing activities    |                                              |    
|                                                                          |                                                        |                                              |    
|Net increase (decrease) in cash                                           |                                                        |                                              | 33 
|Cash at beginning of year                                                 |                                                        |                                              | 295
|                                                                          |                                                        |                                              |    
|Cash at end of year                                                       |                                                        | $                                            | 328
|                                                                          |                                                        |                                              |    
|Reconciliation of net income to net cash flows from operating activities: |                                                        |                                              |    
|                                                                          | Net income                                             |                                              | $  
|                                                                          | Equity in income of subsidiaries                       |                                              |    
|                                                                          | Gain on sale of discontinued real estate segment       |                                              |    
|                                                                          | (Decrease) increase in income tax payable              |                                              |    
|                                                                          | Other                                                  |                                              |    
|                                                                          |                                                        |                                              |    
|                                                                          | Net cash used in operating activities                  |                                              | $  
|                                                                          |                                                        |                                              |    

The accompanying notes are an integral part of these statements.

F-6

---





SCHEDULE II  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)        ZENITH NATIONAL INSURANCE CORP.        NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT

The accompanying condensed financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes thereto
of Zenith National Insurance Corp. ("Zenith National") and subsidiaries (collectively, "Zenith"). Certain prior year numbers have been reclassified to conform to the current year presentation.

NOTE
1.    Investment In Subsidiaries

Zenith
National owns, directly or indirectly, 100% of the outstanding stock of Zenith Insurance Company ("Zenith Insurance"); ZNAT Insurance Company; Zenith Star Insurance Company;
Zenith of Nevada, Inc. (formerly, Perma-Bilt, a Nevada corporation ("Perma-Bilt")); and Zenith National Insurance Capital Trust I (the "Trust"). These investments
are included in the accompanying condensed financial statements on the equity basis of accounting. Included in investment in subsidiaries at December 31, 2004 and 2003 was $2.0 million
of the unamortized excess of cost over underlying net tangible assets of companies acquired prior to 1970, which is considered to have continuing value.

Through
October 8, 2002, Zenith National operated a real estate segment through Perma-Bilt. Zenith National funded the land acquisitions of its real estate segment
through intercompany loans to Perma-Bilt. On October 8, 2002, Zenith closed the sale of its home-building business and related real estate assets in Las Vegas, Nevada to
Meritage Corporation ("Meritage"). In the transaction, Meritage, through its wholly-owned subsidiary, MTH-Homes Nevada, Inc. ("MTH Nevada"), acquired substantially all of
Perma-Bilt's assets, subject to the related liabilities, pursuant to a Master Transaction Agreement, dated as of October 7, 2002, and related asset and real property acquisition agreements
(collectively, the "Agreement"). Zenith received gross proceeds of $65.0 million in connection with the sale, including $28.4 million in repayment of intercompany loans to Zenith
National from Perma-Bilt
and recorded a gain on the sale in 2002 of $6.3 million after tax. Zenith National's equity in the income of its subsidiaries includes $2.9 million in 2002 of after-tax
income related to the discontinued real estate segment of Perma-Bilt. In addition to the consideration received in October 2002, the Agreement entitles Zenith to receive 10% of MTH
Nevada's pre-tax net income, subject to certain adjustments, for each of the twelve-month periods ending September 30, 2003, September 30, 2004 and September 30, 2005.
We recorded additional gains on this sale of $2.0 million before tax ($1.3 million after tax) and $1.8 million before tax ($1.2 million after tax) in 2004 and 2003,
respectively. These gains represent our share of MTH Nevada's profits for the twelve months ended September 30, 2004 and 2003, respectively, under the earn-out provisions of the
Agreement. We expect to receive a final payment in 2005, but we are unable to estimate the amount.

Zenith
National files a consolidated income tax return. Zenith National's equity in the income of its subsidiaries is net of a provision for income tax expense of $66.6 million,
$40.2 million and $8.0 million for the years ended December 31, 2004, 2003 and 2002, respectively. Zenith National has a tax allocation agreement with its subsidiaries and the
2004, 2003 and 2002 condensed financial information reflects Zenith National's portion of the consolidated tax.

NOTE
2.    Debt

Convertible Senior Notes Payable

On
March 21, 2003, Zenith National issued $125.0 million aggregate principal amount of 5.75% Convertible Senior Notes due March 30, 2023 (the "Convertible Notes") in
a private placement, from which Zenith National received net proceeds of $120.0 million. The Convertible Notes are general unsecured obligations of Zenith National and rank equally with
Zenith's other unsecured and

F-7

---



unsubordinated
obligations. Interest on the Convertible Notes is payable semi-annually on March 30 and September 30, beginning September 30, 2003. In addition, Zenith
National will pay contingent interest during any six-month period commencing with the six-month period beginning September 30, 2008, if the average market price of a
Convertible Note for the five trading days ending on the second trading day immediately preceding the relevant six-month period equals 120% or more of the principal amount of the
Convertible Notes. Each $1,000 principal amount of the Convertible Notes is convertible at each holder's option into 40 shares of Zenith National's common stock, par value $1.00 per share, (subject to
adjustment as provided in the Indenture dated March 21, 2003, by and between Zenith National and Wells Fargo Bank Minnesota, N.A., as Trustee (the "Indenture")) only if: (i) during any
fiscal quarter (beginning with the third quarter of 2003) the sale price of the common stock for at least 20 trading days in the 30 trading-day period ending on the last trading day of the
immediately preceding fiscal quarter exceeds 120% of the conversion price on that 30th trading day; (ii) after the 30th day following the initial issuance of the Convertible Notes, the credit
rating assigned to the Convertible Notes by Standard & Poor's Rating Services falls below BB- or is suspended or withdrawn; (iii) Zenith has called the Convertible Notes for
redemption; or (iv) certain corporate events have occurred. The initial conversion rate of 40 shares for each $1,000 principal amount of Convertible Notes is equivalent to an initial conversion
price of $25.00 per share of Zenith National's common stock. The sale price of Zenith National's common stock exceeded the conversion price of $25.00 per share for 20 trading days during the last 30
trading days of the fourth quarter of 2004. As a result, each holder of the notes has the right to convert their Convertible Notes into Zenith National's common stock at a conversion rate of 40 shares
per $1,000 principal amount of Convertible Notes during the period beginning on January 1, 2005 and ending on March 31, 2005 (maximum number of shares that could be required to be issued
is 5.0 million). Whether the Convertible Notes will be convertible after March 31, 2005 will depend upon the occurrence of the events specified in the Indenture, including the sale price
of Zenith National's common stock.

In
March 2004, $5,000 aggregate principal amount of Convertible Notes were converted into 200 shares of Zenith National's common stock at the election of the holders thereof.

Zenith
may redeem some or all of the Convertible Notes for cash on or after March 30, 2008 at the prices specified in the Indenture. Each holder may require Zenith to repurchase
all or a portion of its Convertible Notes on March 30, 2010, March 30, 2013, March 30, 2018, or, subject to certain exceptions, upon a change of control of Zenith. If any holder
requires Zenith to repurchase its Convertible Notes in any of these events, Zenith may choose to pay the repurchase price in cash or shares of its common stock or a combination of cash and shares of
its common stock.

Issue
costs and discount of $5.0 million are being amortized using the effective interest method over the time from issuance to March 30, 2010. During the years ended
December 31, 2004 and 2003, $7.8 million and $6.0 million, respectively, of interest, issue costs and discount were expensed.

An
affiliate of Fairfax Financial Holdings Limited ("Fairfax"), a Toronto based financial services holding company, purchased $30.0 million aggregate principal amount of the
Convertible Notes. At December 31, 2004, companies controlled by Fairfax owned 24% of the outstanding common stock of Zenith National (not including shares issuable upon conversion of the
Convertible Notes held by such companies). Notwithstanding the 24% ownership of the shares of Zenith National, in separate filings with the departments of insurance in California, Texas and New York,
Fairfax has disclaimed control of Zenith National. Fairfax has also granted a proxy covering all of its shares of Zenith National to an individual trustee with instructions to vote the shares in
proportion to the voting of all other Zenith National stockholders, subject to limited exceptions. Fairfax and Zenith have no common directors, management, employees or business infrastructure.
Interest incurred and paid on the $30.0 million of Convertible Notes were $1.7 million and $1.7 million, respectively, in 2004, and $1.3 million, and $0.9 million,
respectively, in 2003.

F-8

---



Subordinated Debentures



Aggregate Maturities



(Dollars in thousands)

Convertible
Notes

Subordinated
Debentures

TotalMaturing In:2005

$
124,995




$
124,9952006200720082009Thereafter




$
77,320


77,320Total

$
124,995

$
77,320

$
202,315




Redemption of Senior Notes Payable

On
May 1, 2002, Zenith National used $57.2 million of its available short-term investments to pay the principal of its 9% Senior Notes due May 1, 2002
(the "Senior Notes"). Interest on the Senior Notes was payable semi-annually. In the year ended December 31, 2002, $1.7 million of interest and issue costs were expensed.

Bank Lines of Credit

At
December 31, 2004, Zenith National had two unsecured lines of credit in the aggregate amount of $50.0 million, all of which was available. One of these lines of credit,
in the amount of $20.0 million, is a one-year revolving line of credit with a bank, expiring August 1, 2005. Interest is payable at the

F-9

---



bank's
prime rate on any borrowings under the line, and the agreement does not subject Zenith to any financial covenants. The other line of credit is a $30.0 million revolving credit agreement
expiring October 31, 2007. Interest is payable on outstanding loans at either the bank's prime rate or a rate based on Eurodollar deposit rates plus a specified margin depending on Zenith
National's credit rating. This credit agreement, as amended, contains covenants that require, among other things, Zenith National to maintain certain financial ratios, including a minimum amount of
capital in its insurance subsidiaries, a maximum debt-to-total capitalization ratio and a minimum interest coverage ratio. We were in compliance with all of these covenants at
December 31, 2004.

In
January 2003, we borrowed $45.0 million under our two bank lines of credit to make a capital contribution to Zenith Insurance. All of the borrowing was repaid from the net
proceeds from the issuance of the Convertible Notes on March 21, 2003. In 2002, we borrowed $25.0 million to make a capital contribution to Zenith Insurance and repaid the borrowing from
the proceeds of the sale of the real estate business segment. There were no outstanding borrowings under the two bank lines of credit at December 31, 2004 and 2003.

We
currently do not anticipate the need to draw on our available lines of credit because Zenith National's current cash and available invested assets are sufficient for any foreseeable
requirements at this time.

NOTE
3.    Commitments and Contingencies

Contingencies Surrounding Reinsurance Receivable from Reliance Insurance Company

At
December 31, 2004 and 2003, Reliance Insurance Company ("Reliance") owed Zenith Insurance $6.0 million of reinsurance recoverable on paid and unpaid losses in connection
with the reinsurance arrangements assumed by Zenith Insurance in its 1996 acquisition of the Associated General Commerce Self-Insurers' Trust Fund.

In
January 2001, Reliance was subject to a Supervision Order by the Pennsylvania Department of Insurance. This is not the same as insolvency. Based on the published 1999 financial
statements for Reliance, which showed considerable net worth, we had no reason to conclude that we had an impairment of our reinsurance recoverable at the time of the Supervision Order. On
May 29, 2001, the Pennsylvania Department of Insurance issued an Order of Rehabilitation for Reliance. Rehabilitation raises the possibility of compromise with Reliance's creditors. Therefore,
we disclosed a contingency in the second quarter of 2001 related to possible impairment of our receivable from Reliance. With no information with which to estimate our impairment (no financial
statements were filed by Reliance for 2000), we concluded that we could not determine the outcome of the contingency at that time. On October 3, 2001, the Commonwealth Court of Pennsylvania
approved an Order of Liquidation for Reliance, which was experiencing cash flow problems caused by slow reinsurance recoveries. At that time, an estimated balance sheet of Reliance was made available
as of December 31, 2000, from which we estimated that we could expect to recover no more than 50% of our receivable. This established a range of outcomes for the amount impaired between
$3.0 million and $6.0 million (i.e., we expect to recover an amount between 50% and nothing). We have no information with which to establish an estimate within that range as better than
any other and, therefore, we recorded an impairment provision of $3.0 million for our receivable from Reliance. We recorded the provision in the third quarter of 2001, the period for which the
information became available to estimate the impairment provision. The impairment provision was $3.0 million at December 31, 2004 and 2003. The eventual outcome of this matter will be
determined by the ultimate amount of Reliance's liabilities and whether or not Reliance has sufficient assets or can obtain recoveries and investment income in an amount sufficient to pay its
liabilities. We will revise our impairment provision, if necessary, upon receipt of relevant information.

F-10

---





State
guarantee funds ("Guarantee Funds") exist to ensure that policyholders (holders of direct insurance policies but not of reinsurance policies) receive payment of their claims if
insurance companies become insolvent. The Guarantee Funds are funded primarily by statutorily prescribed assessments they bill to other insurance companies doing business in their states. Various
mechanisms exist in some of these states for assessed insurance companies to recover these assessments. Upon the insolvency of an insurance company, the Guarantee Funds become primarily liable for the
payment of the insolvent company's liabilities to policyholders. The declaration of an insolvency establishes the presumption that assessments by the Guarantee Funds are probable. Zenith writes
workers' compensation insurance in many states in which unpaid workers' compensation liabilities are the responsibility of the Guarantee Funds and has received, and expects to continue to receive,
Guarantee Fund assessments, some of which may be based on certain of the premiums it has already earned at December 31, 2004.

Zenith
recorded an estimate of $7.7 million (net of expected recoveries of $2.6 million recoverable before the end of 2005) for its expected liability at
December 31, 2004 for Guarantee Fund assessments. Recoveries are attributable to premium tax credits in various states. The amount of the recovery we have recorded is limited to credits
applicable to, and recoverable from, premiums earned at December 31, 2004. The estimated expense for Guarantee Fund assessments was $5.4 million, $3.4 million and
$4.1 million in 2004, 2003 and 2002 respectively. Our estimated liability is based on currently available information and could change based on additional information or reinterpretation of
existing information concerning the actions of the Guarantee Funds. Zenith expects that it will continue to accrue and receive Guarantee Fund assessments; and the ultimate impact of such assessments
will depend upon the amount and timing of the assessments and of any recoveries to which Zenith is entitled.

Contingencies Surrounding the Recoverability of the Special Disability Trust Fund Receivable

The
Florida Special Disability Trust Fund ("SDTF") was established to reimburse insurance companies and employers for the cost of certain workers' compensation claims. The SDTF promotes the
re-hiring of injured workers by providing a reimbursement for certain qualifying claims made by a previously injured worker subsequent to their re-hiring. These claims are
sometimes referred to as "second injuries." We are able to submit such second injury claims to the SDTF and, if the claims are accepted, we are reimbursed for part of the cost of the claim. The SDTF
stopped accepting new second injury claims dated after January 1, 1998. At December 31, 2004, approximately 550 of our Florida claims have been accepted, for which we have recorded a
recoverable of $7.6 million, net of amounts due to reinsurers. We bill the SDTF and receive reimbursements as we make payments on accepted claims. The SDTF is funded by currently assessing a
fee of 4.52% of worker's compensation premiums written in Florida, and we accrue the assessment as a liability when we write Florida business. If the legislature in Florida were to decide to cease or
suspend the assessment, and thereby the funding of the SDTF, any recoverable that we may have at that time which is related to un-reimbursed claims might be at risk. However, we have no
current information to indicate that the SDTF assessment in Florida will not continue. We continue to collect recoveries for second injury claims from the SDTF and although the SDTF is currently about
48 months behind schedule in reimbursing claims, we expect to fully recover the remaining amount receivable.

Litigation

Zenith
National and its subsidiaries are defendants in various litigation. In the opinion of management, after consultation with legal counsel, such litigation is either without merit or
the ultimate liability, if any, is not expected to have a material adverse effect on the consolidated financial condition, results of operations or cash flows of Zenith.

F-11

---



NOTE
4.    Accumulated Other Comprehensive Income

Accumulated
other comprehensive income is comprised of changes in unrealized appreciation on investments and changes in foreign currency translation adjustments. The following table
summarizes the components of accumulated other comprehensive income:

|                                                      
|------------------------------------------------------
|
|
|
|Net unrealized appreciation on investments, before tax
|Deferred tax expense                                  
|                                                      
|                                                      
|                                                      
|Foreign currency translation adjustment, before tax   
|Deferred tax expense                                  
|                                                      
|                                                      
|                                                      
|Total accumulated other comprehensive income:         
|                                                      

NOTE 5.    Non-Cash Financing Activities

In
March 2004, a Zenith employee exercised his option to purchase from Zenith National 201,000 shares of Zenith National's common stock at the exercise price of $23.63 per share,
resulting in an aggregate exercise price of $4.7 million. In lieu of cash payment, 121,015 shares of Zenith National's common stock valued at $4.7 million previously acquired by the
employee were tendered to, and accepted by, Zenith in payment of the aggregate exercise price.

The
exercise of the stock options had no net effect on stockholders' equity because the increase in treasury stock of $4.7 million for the shares tendered was offset by an
increase in common stock of $0.2 million and an increase in additional paid-in capital of $4.5 million for the 201,000 shares issued.

F-12

---





SCHEDULE III  SUPPLEMENTARY INSURANCE INFORMATION
ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES

|Column A                    |                       | Column B |        | Column C |  | Column D  |           | Column E |         | Column F |  | Column G |  | Column H |         | Column I |        | Column J |  | Column K
|--------------------------- | --------------------- | -------- | ------ | -------- |  | --------- | --------- | -------- | ------- | -------- |  | -------- |  | -------- | ------- | -------- | ------ | -------- |  | --------
|
|(Dollars in thousands)      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|Year Ended December 31,2004 |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|Property and Casualty:      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Workers' compensation |          | $      | 17,763   |  | $         | 1,343,760 |          | $       | 135,026  |  |          |  | $        | 902,047 |          |        |          |  | $       
|                            | Reinsurance           |          |        | 901      |  |           | 138,559   |          |         | 7,193    |  |          |  |          | 42,378  |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          | 18,664 |          |  | 1,482,319 |           |          | 142,219 |          |  |          |  | 944,425  |         |          |        |          |  | 628,763 
|Investment                  |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         | $        | 61,876 |          |  |         
|Parent                      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Total                 |          | $      | 18,664   |  | $         | 1,482,319 |          | $       | 142,219  |  |          |  | $        | 944,425 |          | $      | 61,876   |  | $       
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|2003                        |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|Property and Casualty:      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Workers' compensation |          | $      | 10,311   |  | $         | 1,085,400 |          | $       | 102,068  |  |          |  | $        | 712,796 |          |        |          |  | $       
|                            | Reinsurance           |          |        | 1,611    |  |           | 135,349   |          |         | 9,182    |  |          |  |          | 61,003  |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          | 11,922 |          |  | 1,220,749 |           |          | 111,250 |          |  |          |  | 773,799  |         |          |        |          |  | 537,922 
|Investment                  |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         | $        | 56,103 |          |  |         
|Parent                      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Total                 |          | $      | 11,922   |  | $         | 1,220,749 |          | $       | 111,250  |  |          |  | $        | 773,799 |          | $      | 56,103   |  | $       
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|2002                        |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|Property and Casualty:      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Workers' compensation |          |        |          |  |           |           |          |         |          |  |          |  | $        | 503,859 |          |        |          |  | $       
|                            | Reinsurance           |          |        |          |  |           |           |          |         |          |  |          |  |          | 53,196  |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  | 557,055  |         |          |        |          |  | 421,128 
|Investment                  |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         | $        | 48,811 |          |  |         
|Parent                      |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         
|                            | Total                 |          |        |          |  |           |           |          |         |          |  |          |  | $        | 557,055 |          | $      | 48,811   |  | $       
|                            |                       |          |        |          |  |           |           |          |         |          |  |          |  |          |         |          |        |          |  |         

F-13

---





SCHEDULE IV  REINSURANCE  ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES

|Column A                 |  | Column B |           | Column C |   | Column D |  | Column E |        | Column F |  
|------------------------ |  | -------- | --------- | -------- | - | -------- |  | -------- | ------ | -------- | -
|
|Years Ended December 31, |  |          |           |          |   |          |  |          |        |          |  
|2004                     |  |          |           |          |   |          |  |          |        |          |  
|Premiums earned          |  | $        | 1,034,903 |          | $ | 144,260  |  | $        | 53,782 |          | $
|2003                     |  |          |           |          |   |          |  |          |        |          |  
|Premiums earned          |  |          | 815,446   |          |   | 112,331  |  |          | 70,684 |          |  
|2002                     |  |          |           |          |   |          |  |          |        |          |  
|Premiums earned          |  |          | 555,023   |          |   | 57,739   |  |          | 59,771 |          |  

SCHEDULE V  VALUATION AND QUALIFYING ACCOUNTS  ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES

|                                                    |  |   |       | Column C |   |       |  | 
|--------------------------------------------------- |  | - | ----- | -------- | - | ----- |  | 
|
|
|Years Ended December 31,                            |  |   |       |          |   |       |  | 
|2004                                                |  |   |       |          |   |       |  | 
|Allowance for uncollectible premiums                |  | $ | 578   |          | $ | 3,831 |  | 
|Provision for uncollectible reinsurance recoverable |  |   | 3,000 |          |   |       |  | 
|2003                                                |  |   |       |          |   |       |  | 
|Allowance for uncollectible premiums                |  |   | 2,300 |          |   | 5,141 |  | 
|Provision for uncollectible reinsurance recoverable |  |   | 3,000 |          |   |       |  | 
|2002                                                |  |   |       |          |   |       |  | 
|Allowance for uncollectible premiums                |  |   | 7,704 |          |   | 3,077 |  | 
|Provision for uncollectible reinsurance recoverable |  |   | 3,000 |          |   |       |  | 

---

F-14

---





SCHEDULE VI  SUPPLEMENTARY INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS  ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES AND ITS PROPORTIONATE SHARE OF EQUITY INVESTEE     
ADVENT CAPITAL (HOLDINGS) PLC

|Column A                                                                                |  | Column B |        | Column C |   | Column D  |  | Column E |  | Column F |         | Column G |   | Column H |  | Column I |        | Column J |   | Column K
|--------------------------------------------------------------------------------------- |  | -------- | ------ | -------- | - | --------- |  | -------- |  | -------- | ------- | -------- | - | -------- |  | -------- | ------ | -------- | - | --------
|
|
|
|
|
|(a) Zenith National Insurance Corp. and Subsidiaries                                    |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|                                                                                        |  | $        | 18,664 |          | $ | 1,482,319 |  |          |  | $        | 142,219 |          | $ | 944,425  |  | $        | 61,876 |          | $ | 615,397 
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|(c) Proportionate share of Zenith's equity investee  Advent Capital (Holdings) PLC (1) |  | $        | 2,318  |          | $ | 81,411    |  |          |  | $        | 13,752  |          | $ | 33,509   |  | $        | 768    |          | $ | 23,486  
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|
|(a) Zenith National Insurance Corp. and Subsidiaries                                    |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|                                                                                        |  | $        | 11,922 |          | $ | 1,220,749 |  |          |  | $        | 111,250 |          | $ | 773,799  |  | $        | 56,103 |          | $ | 523,707 
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|(c) Proportionate share of Zenith's equity investee  Advent Capital (Holdings) PLC (1) |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|                                                                                        |  | $        | 2,721  |          | $ | 240,493   |  |          |  | $        | 17,958  |          | $ | 35,300   |  | $        | 1,401  |          | $ | 17,870  
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|
|(a) Zenith National Insurance Corp. and Subsidiaries                                    |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          | $ | 557,055  |  | $        | 48,811 |          | $ | 391,960 
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|(c) Proportionate share of Zenith's equity investee  Advent Capital (Holdings) PLC (1) |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          | $ | 19,132   |  | $        | 1,280  |          | $ | 7,342   
|                                                                                        |  |          |        |          |   |           |  |          |  |          |         |          |   |          |  |          |        |          |   |         

---

F-15

---



ZENITH NATIONAL INSURANCE CORP. AND SUBSIDIARIES

EXHIBIT INDEX

|Number |  | Exhibit                                                                                                                                                                                                                                                            |  | 
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|       |  |                                                                                                                                                                                                                                                                    |  | 
|*10.28 |  | 1996 Employee Stock Option Plan, Form of Stock Option Agreement                                                                                                                                                                                                    |  | 
|*10.42 |  | 2003 Non-Employee Director Deferred Compensation Plan, Form of Deferred Compensation Agreement                                                                                                                                                                     |  | 
|*10.43 |  | Description of Compensation Arrangement for members of the Board of Directors.                                                                                                                                                                                     |  | 
|12     |  | Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                  |  | 
|13     |  | Zenith's Annual Report to Stockholders for the year ended December 31, 2004, but only to the extent such report is expressly incorporated by reference herein, and such report is not otherwise to be deemed "filed" as a part of this Annual Report
on Form 10-K. |  | 
|21     |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                     |  | 
|31.1   |  | Certification of CEO pursuant to Exchange Rule 13a-14(a) or Rule 15d-14(a)                                                                                                                                                                                         |  | 
|31.2   |  | Certification of CFO pursuant to Exchange Rule 13a-14(a) or Rule 15d-14(a)                                                                                                                                                                                         |  | 
|32     |  | Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                   |  | 

We
exclude other schedules from this list  and from this Form 10-K  because either they are not applicable or the information is included
in our Consolidated Financial Statements.

---

---



QuickLinks