Zenith National Reports $33.6-Million Loss : Earnings: The fourth-quarter results follow the insurance company’s taking charges reflecting the slide in its junk-bond holdings.

Zenith National Insurance Corp., a Woodland Hills-based insurer that invested heavily in junk bonds, reported a net loss of $33.6 million for the fourth quarter of 1990 after taking $42.6 million in charges to reflect the bonds’ recent losses.

Zenith’s report was expected. The company, which provides workers’ compensation and other property-casualty insurance, had announced in December that it planned to take the charges, which included a $25-million writedown in the value of its junk bonds and $12.5 million in losses from actual sales of the bonds.

Junk bonds are the high-risk, high-yield debt securities made famous during the 1980s by Michael Milken and his former investment firm, Drexel Burnham Lambert Inc. Milken, who has pleaded guilty to a variety of securities violations, is a cousin of Zenith National Chairman Stanley R. Zax.

Prices of many junk bonds have dropped sharply in recent quarters largely because the corporate borrowers that issued them are now struggling to repay the debts. The economic recession has exacerbated the problem.

Zenith’s fourth-quarter loss, which came on revenue of $132.6 million, compared with Zenith’s year-earlier profit of $5.3 million on revenue of $123.8 million.

Excluding the charges and certain tax benefits, Zenith said fourth-quarter earnings from its operations fell 21% from a year earlier, to $7.78 million from $9.91 million.

For all of 1990, the company had a net loss of $9.16 million, compared with a profit of $41.1 million in 1989. Zenith’s annual revenue rose 6% in 1990 to $520.9 million from $491.1 million a year earlier.

Zenith’s junk-bond holdings aren’t seen as a serious threat to the company’s overall financial condition; its junk bonds amounted to about 10% of its $1.33 billion in total assets as of Dec. 31.

Still, the latest losses helped cut Zenith’s book value--the amount of its assets minus its debts, or its net worth--by 14% as of Dec. 31, to $12.62 a share from $14.74 a share a year earlier.

Zax said in an interview last April that it was unlikely that Zenith would post a major loss for the year from having to sell or write down its junk bonds.

But for all of 1990, Zenith ended up taking a total of $50.5 million in junk-bond-related charges, 10 times more than the $5.1 million in similar charges it incurred in 1989.