Fitch Affirms Everest Re Rtgs Following 4Q Asbestos Reserve Charge; Outlook Stable

Business Wire, Jan 18, 2008

CHICAGO -- Fitch Ratings has affirmed the ratings of Everest Re Group, Ltd. and its subsidiaries (Everest Group) following the company's announcement yesterday that it will take a $311 million pretax fourth quarter charge related to its asbestos exposures. This follows an internal asbestos review the company announced with third quarter financial results.

Everest Reinsurance Holdings, Inc.

--Issuer Default Rating (IDR) at 'A ';

--5.4% senior notes due 2014 at 'A';

--8.75% senior notes due 2010 at 'A';

--6.60% junior subordinated debenture due 2037 at 'A-'.

A full list of ratings is available at the end of this release.

The Rating Outlook is Stable.

Fitch believes that Everest Group's asbestos survival ratio (a measure of reserve adequacy) has been historically low relative to its peers and industry averages, and therefore, a reserve charge of this magnitude is within Fitch's current expectations. Fitch also believes that the company's projected 2007 year-end earnings will be more than sufficient to absorb the charge.

That being said, Fitch believes that Everest Group's survival ratio remains below expectations relative to Fitch's benchmarks at the company's current 'AA-' very strong rating level, even including the fourth quarter charge. As a result, Fitch will view capital conservatively with this in mind going forward. Fitch continues to incorporate additional reserve strengthening needed to approximate levels indicated by Everest Group's very strong rating. Fitch will continue to monitor Everest Group's asbestos loss experience for this reason and as some amount of industry-wide uncertainty still remains regarding ultimate exposures.

The ratings continue to be based on the company's strong franchise and competitive position in chosen markets, diversified underwriting portfolio in primary insurance and reinsurance markets, and favorable operating performance and good capital position. Fitch believes that Everest Group's strong balance sheet, demonstrated financial flexibility, and diverse geographic and business portfolio will continue to drive profitable growth in an increasingly complex and competitive environment.

Everest Group's growth has moderated due to price decreases and increased competition. Everest Group's gross premium volume decreased modestly in 2006, while volume was up slightly year-over year at year-to-date Sept. 30, 2007. While an improvement in Everest Group's operating leverage has been a favorable outcome of this moderating growth, Fitch believes that, more importantly, Everest Group will be challenged to find new growth opportunities in the near term.

Following repayment of $216.5 million in junior subordinated debt that was redeemed on Nov. 15, 2007, Everest Group's ratio of debt and trust-preferred securities to total capital is approximately 17%. Fitch expects this ratio to remain stable going forward. Interest coverage is favorable at 15 times (x).

The following ratings are affirmed by Fitch with a Stable Rating Outlook:

Everest Re Capital Trust

--7.85% trust preferred securities due 2032 at 'A-'.

Everest Re Capital Trust II

--6.2% trust preferred securities due 2034 at 'A-'.

The following Insurer Financial Strength ratings are affirmed at 'AA-' with a Stable Rating Outlook:

--Everest Reinsurance Company;

--Everest National Insurance Company;

--Everest Indemnity Insurance Company;

--Everest Security Insurance Company;

--Everest Reinsurance (Bermuda) Ltd.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.