A.M. Best Affirms Ratings Of Everest Reinsurance (Bermuda) Ltd., Its Subsidiaries And Everest Re Group Ltd.

A.M. Best Co. has affirmed the financial strength ratings (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Everest Reinsurance (Bermuda) Ltd. (Everest Re) (Bermuda) (NYSE: RE) and its reinsurance and insurance subsidiaries. Concurrently, A.M. Best has affirmed the ICRs of “a-” of Everest Re Group, Ltd. (Bermuda) and Everest Reinsurance Holdings Inc. (Delaware). A.M. Best also has affirmed the debt ratings of Everest Re Group, Ltd., Everest Reinsurance Holdings Inc., Everest Capital Trust II and Everest Capital Trust III. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The ratings reflect Everest Re’s consistently superior risk-adjusted capital position, long-term track record of generating favorable earnings, experienced management team and market profile as a leading global provider of insurance and reinsurance products. Given its conservative financial leverage measures, Everest Re maintains strong financial flexibility with the ability to effectively manage its capital through market cycles. This is evidenced by Everest Re’s five-year average combined ratio, which is below breakeven, representing underwriting profitability. Cash flows from operations also have consistently been strong. Everest Re’s balance sheet is supported by its conservative investment strategy with the current investment portfolio held at a shorter duration and equities at less than 10% of total investments.

Everest Re continues to benefit from a seasoned management team, which has successfully deployed its low-cost operating structure to profitably distribute its reinsurance and insurance products globally through a large network of insurance and reinsurance intermediaries. Due to its diversified product offering and geographic spread, A.M. Best believes Everest Re is well positioned within its business sector to continue to perform in line with its peer group despite the potential for reductions in near- to mid-term operating margins.

A.M. Best believes that Everest Re has maintained strong traditional risk management capabilities and has established an enterprise risk management framework that effectively identifies, measures and monitors both existing and emerging risks across its respective businesses and enables the efficient allocation of capital. It is A.M. Best’s opinion that Everest Re continues to enhance its enterprise risk management and internal modeling capabilities.

Somewhat offsetting these positive rating factors are the organization’s exposure to large catastrophe losses. As part of its catastrophe management process, Everest Re utilizes catastrophe modeling and establishes risk limits to control catastrophic exposures on both a probable maximum loss (PML) and aggregate basis, although catastrophe losses could impact earnings in any given year. The organization also maintains net asbestos and environmental (A&E) exposure of approximately $480 million, which has been declining in recent years. A&E reserves are monitored on a quarterly basis against emerging trends with the most recent review indicating that current reserve levels are adequate.

Rating factors that could lead to a positive outlook and/or rating upgrades include the continuation of Everest Re’s long-term, consistently strong operating profitability relative to its peers as well as maintaining strong risk-adjusted capital levels.

Rating factors that could lead to a revised outlook to negative and/or a downgrading of the company’s ratings include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers and/or A.M. Best’s expectations, significant adverse loss reserve development and/or a material decline in its risk-adjusted capital.

The FSRs of A+ (Superior) and ICRs of “aa-” have been affirmed for Everest Reinsurance (Bermuda) Ltd. and its following reinsurance and insurance subsidiaries:
  • Everest Reinsurance Company
  • Everest International Reinsurance, Ltd.
  • Everest Reinsurance Company (Ireland), Limited
  • Everest National Insurance Company
  • Everest Indemnity Insurance Company
  • Everest Security Insurance Company
  • Everest Insurance Company Canada

The following debt ratings have been affirmed:

Everest Reinsurance Holdings, Inc.

-- “a-” on $250 million 5.4% senior unsecured notes, due 2014

-- “bbb” on $400 million 6.6% fixed to floating long term junior subordinated notes, due 2067

Everest Re Capital Trust II —(guaranteed by Everest Reinsurance Holdings, Inc.)

-- “bbb+” on $320 million 6.20% trust preferred capital securities, due 2034

The following indicative ratings have been affirmed under the shelf registration:

Everest Re Group, Ltd.—

-- “a-” on senior unsecured debt

-- “bbb+” on subordinated debt

-- “bbb” on preferred stock

Everest Reinsurance Holdings, Inc.—

-- “a-” on senior unsecured debt

-- “bbb+” on subordinated debt

Everest Re Capital Trust III (guaranteed by Everest Reinsurance Holdings, Inc.)

-- “bbb+” on trust preferred securities

The methodology used in determining these ratings is Best’s Credit Rating Methodology , which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Insurance Holding Company and Debt Ratings”; “Understanding BCAR for Canadian Property/Casualty Insurers”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Catastrophe Analysis in A.M. Best Ratings.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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